TEST BANK Understanding Business 13th Edition by William Nickels, Jim McHugh and Susan McHugh
TABLE OF CONTENTS: CHAPTER 1: Taking Risks and Making Profits within the Dynamic Business Environment CHAPTER 2: Understanding Economics and How It Affects Business CHAPTER 3: Doing Business in Global Markets CHAPTER 4: Demanding Ethical and Socially Responsible Behavior CHAPTER 5: How to Form a Business CHAPTER 6: Entrepreneurship and Starting a Small Business CHAPTER 7: Management and Leadership CHAPTER 8: Structuring Organizations for Today’s Challenges CHAPTER 9: Production and Operations Management CHAPTER 10: Motivating Employees CHAPTER 11: Human Resource Management: Finding and Keeping the Best Employees CHAPTER 12: Dealing with Employee–Management Issues CHAPTER 13: Marketing: Helping Buyers Buy CHAPTER 14: Developing and Pricing Goods and Services CHAPTER 15: Distributing Products CHAPTER 16: Using Effective Promotions CHAPTER 17: Understanding Accounting and Financial Information CHAPTER 18: Financial Management CHAPTER 19: Using Securities Markets for Financing and Investing Opportunities CHAPTER 20: Money, Financial Institutions, and the Federal Reserve
Chapter 1: Taking Risks and Making Profits within the Dynamic Business Environment 1) Describe three ways that governments can foster entrepreneurship and encourage the creation of wealth
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Describe how businesses can use technology to be more responsive to customers.
3) Competition among businesses has never been greater. Identify and describe two ways that businesses can become more competitive.
4) What is demography? Identify two demographic trends in the United States and discuss how they will impactUnited States businesses.
5) Describe what we mean by greening and thinking green. List five ways that people and businesses are participating in the green movement. List business opportunities that may emerge from this movement.
6) Trace the evolution of American business. Identify the key trends, and discuss the implications these trends have for the future.
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An entity that seeks to earn a profit by providing a good or service is known as a(n) A) industry. B) corporation. C) business. D) service.
8) __________ is the amount a business earns after deducting what it spends for salaries and other expenses. A) Profit B) Revenue C) Interest D) Dividends 9)
A business incurs a __________ if its costs and expenses exceed its revenues. A) loss B) liability C) debit D) dividend
10) __________ is the chance a business owner will lose the time and money invested in a business that proves to be unprofitable. A) Depreciation B) Risk C) Opportunity D) Redundancy
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The total amount of money that businesses take in by selling goods and services is called
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A) profit. B) revenue. C) loss. D) retained earnings.
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A(n) __________ is a person who assumes the risk of starting a business. A) manager B) entrepreneur C) employee D) stakeholder
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Starting a business always involves A) profit. B) loss. C) revenue. D) risk
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Often in business the greater the risk, the A) greater the potential reward. B) lower the expected revenues. C) lower the value provided to society. D) greater the number of stakeholders.
15) __________ is a measure of the general well-being and satisfaction derived from a variety of factors including political freedom, safety, education, and a clean environment. A) Standard of living B) Quality of life C) Gross national income D) Social satisfaction
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16) their
The amount of goods and services people can buy with the money they have is called
A) nominal income. B) consumer price index. C) profit margin. D) standard of living.
17) The customers, employees, stockholders, suppliers, creditors, and others who stand to gain or lose by the policies and activities of a business represent the firm's A) market makers. B) economic environment. C) stakeholders. D) social environment.
18) The most important difference between for-profit businesses and nonprofit organizations is that A) for-profit businesses do not benefit society. B) nonprofit organizations seek to make a profit for their owners and organizers. C) nonprofit organizations do not seek a profit for their owners or organizers. D) nonprofit organizations do not answer to stakeholders.
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A common characteristic of most entrepreneurs is that they A) accept the risks involved in starting and managing a business. B) have a high level of scientific and technical expertise. C) possess a great deal of personal wealth. D) have experience in running large, complex organizations.
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What is the best example of a business whose goal is to earn a profit? A) a community college B) American Red Cross C) League of Women Voters D) Amazon
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In order to make an intelligent investment decision, entrepreneurs should
A) limit their options to those business investments that are backed by the U.S. government. B) invest in businesses that have generated a stable rate of profit for at least the past 10 years. C) invest only in business opportunities where it is possible to take an active role in management. D) compare the risks of potential investments to their expected profits and find the right balance between profit and risk.
22) Honda and Hyundai have insourced for years to design and manufacture cars in the United States. What statement is accurate about this practice? A) Insourcing helps offset the number of jobs being outsourced. B) Insourcing increases the number of jobs being outsourced. C) Insourcing damages the United States economy. D) Insourcing causes jobs to be lost to overseas competitors.
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Public schools, charities, and government agencies generally
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A) have the same goals as for-profit businesses. B) do not seek to earn a profit. C) provide goods rather than services. D) do not have any stakeholders.
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For-profit businesses and nonprofit organizations are similar in that they both A) contribute to the welfare of society. B) seek to earn a profit. C) have a limited life. D) must be controlled by a board of directors.
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The standard of living for a nation's people depends mainly on A) the quality of the natural environment. B) how much political freedom they have. C) their income and the prices of the goods and services they can buy. D) the amount of labor and capital available employed in the manufacturing sector.
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Today’s businesses attempt to meet the needs of A) their customers, even if it comes at the expense of employees and other stakeholders. B) their employees, even if it means shortchanging customers by charging higher prices. C) all stakeholders. D) exclusively their owners, since they are ultimately the ones who pay the bills.
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What is the most accurate statement about the impact of business on society?
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A) When businesses earn a profit for their owners, they usually do so at the expense of the rest of society, which proves it is never a win-win situation. B) While businesses often improve the standard of living within a society, they can do little to improve the quality of life. C) Businesses often improve the quality of life, but can do little to improve the standard of living for most people. D) Businesses can have a positive impact on both the standard of living and the quality of life within a society.
28) Last year, Jensen Consulting reported revenues of $34 million while its total expenses were $10 million. Based on this information, Jensen reported A) profits of $24 million. B) profits of $34 million. C) losses of $24 million. D) losses of $34 million.
29) Taylor recently started selling her invention: A bed that looks like it floats in mid-air. The bed is actually suspended by magnetic forces. Taylor is a(n) A) arbitrageur. B) entrepreneur. C) speculator. D) account manager.
30) Roman wants to invest some money that he just inherited. His friend Jon wants him to invest in his new food truck business, promising Roman a better return on his investment than a traditional savings account. Roman should keep in mind that to earn a higher return on his money he
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A) will have to invest overseas. B) should only invest in a long-standing business. C) will probably have to accept a higher level of risk. D) will probably have to engage in illegal activities.
31) Though the prices of things she buys have gone up, Maya's income has remained stable over the past few years. Nevertheless, Maya feels better off because the environment is cleaner, the crime rate has dropped, she has more relaxation time, and the quality of medical care has improved. If Maya's experience is typical, we can assume that the standard of living has A) increased, but the quality of life has decreased. B) increased, and so has the quality of life. C) declined, but the quality of life has increased. D) declined, and so has the quality of life.
32) Hyun and her three college friends enjoy perfumes. As a special gift to each of them last holiday season, Hyun found a way to make scented candles with each friend's favorite perfume scent. The three friends loved her gift idea and encouraged Hyun to create more and sell them online. Recently, she is filling orders from her website, and turning a profit. Hyun is proof that A) personalized products will always be successful. B) when you successfully fill a market need, you can make money. C) the Internet is a way to distribute just about anything. D) the cost of supplies to make candles is relatively cheap.
33) Miranda wants to operate a small catering business out of her home, located in a quiet residential neighborhood. She asks for input from her neighbors, the homeowner's association, her suppliers, and the zoning commission about issues including parking, noise, safety concerns, and operating hours. Before officially opening, Miranda adjusts her business plan based on the feedback she received. Miranda has discovered that
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A) her new business will definitely be successful. B) stakeholder considerations are important if you want your business to thrive. C) town politics is more important than company profits. D) consulting various stakeholders eliminates any risk.
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Generally, the greatest amount of risk is involved in A) working for the government. B) working for a large business. C) working for a small business. D) starting a business.
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The resources that contribute to the creation of wealth are known as A) production coefficients. B) factors of production. C) production technologies. D) production aggregates.
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Which is considered a factor of production? A) bonds B) competition C) knowledge D) service
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As a factor of production, the term capital includes
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A) stocks and bonds issued by corporations. B) natural resources such as land and water. C) tools, machinery, and buildings. D) services provided by the government.
38) Two factors of production that seem to contribute the most to a nation's ability to create wealth are A) land and labor. B) land and capital. C) entrepreneurship and labor. D) entrepreneurship and knowledge.
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The external and internal circumstances that surround the business are referred to as A) the business environment. B) the factors of production. C) the stakeholders. D) the business disciplines.
40) Entrepreneurs weigh the differences between the benefits of starting a business and those things that they are likely to forego because they choose to work for themselves. Such things they are likely to pass up on are A) the freedom to make their own decisions. B) local government benefits such as enterprise zone tax credits. C) employer-paid benefits such as paid vacation and health insurance. D) the opportunity to generate greater wealth.
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What is a benefit of owning your own business? A) freedom to keep the profits from your business B) government-supplied health insurance C) extended paid vacation time D) shorter work hours
42) As you consider the factors of production, what did management theorist Peter Drucker believe to be one of the most important contributing factors to increasing our nation's wealth? A) land B) labor C) knowledge D) capital
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When we compare the factors of production in wealthy versus poor nations, we find
A) poor nations have plenty of land and knowledge, but very little labor. B) poor and wealthy nations (both) have an abundance of knowledge; it is the land that varies, with rich nations always having more. C) wealthy nations have knowledge and entrepreneurial opportunities, while poor nations are often lacking in these areas. D) wealthy nations have land and labor, while poor nations have capital and entrepreneurship.
44) A nation progresses socially when it has good schools, clean air and water, and more. Which statement accurately addresses conditions for social progress?
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A) Social progress will evolve when capital is apportioned to everyone in equal amounts. B) A city, state, or nation's social progress needs the right business environment. C) The foundation for social progress is a handful of wealthy entrepreneurs willing to spread the wealth. D) Social progress can only improve when there is a strong labor pool to draw from.
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Which statement about factors of production is the most accurate? A) The five factors of production are energy, capital, labor, leadership, and money. B) Wealth creation in poor nations is slowed by chronic shortages of labor. C) Each of the factors of production is equally important in creating wealth. D) Entrepreneurship and knowledge are the most important in creating wealth.
46) Randall owns a nursery. The trucks, handcarts, and forklift he purchased for the business are called A) natural resources. B) intangible resources. C) knowledge assets. D) capital investments.
47) In a small and poor nation, the current prime minister has a desire to improve conditions for her citizens. The prime minister has received recommendations from several of her advisors. Which recommendation is likely to create the most wealth for the country? A) Acquire more land by invading a neighboring country that is even poorer and weaker. B) Use foreign aid from other nations to purchase more tools and machinery. C) Establish a business environment that promotes and rewards entrepreneurship. D) Establish barriers to trade to protect local businesses from foreign competition.
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48) Tom and his dad combined their love of baseball with a business venture. They purchased a small cart and began selling memorabilia outside of their hometown stadium. Their first year went well, but the past two years have been quite a struggle. Due to poor economic conditions and the team's horrible record, ticket sales at the stadium are down, which has significantly hurt their sales as well. As a recent business graduate, you explain to them that A) this type of business is always high risk because it is seasonal. B) the business does not fill a sufficient need for most people. C) environmental circumstances are dynamic and tough to control. D) social entrepreneurs are currently getting most of the attention.
49) China is a nation with a vast amount of land and a very large population. Another characteristic of this nation is its people's affinity for saving money. Referring to the five factors of production, if the government of China wanted to make progress in building its business environment by focusing on factors that needed improvement, its best strategy would be to A) increase the supply of labor. B) increase sources for capital. C) increase entrepreneurship. D) encourage neighboring nations to provide land for business development.
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Taxes and government regulations are part of the __________ environment of business. A) economic and legal B) competitive C) social D) technological
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What policies tend to favor business?
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A) minimal government spending because it keeps taxes to a minimum B) more government services because it minimizes tax consequences C) maximum government spending because it raises business profits D) increased regulation because it benefits stakeholders
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In order to create more wealth and provide better services, some nations recognize that
A) raising taxes benefits all businesses. B) a good strategy is to minimize interference with the free exchange of goods and services. C) restricting trade with other countries always helps domestic businesses. D) taking control of privately owned businesses and making them government-run will improve the lives of everyone.
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In countries where businesses are government owned, A) there is less incentive to work hard. B) the right amount of each good is produced. C) profits tend to be higher. D) productivity tends to be highest.
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High tax rates tend to A) promote economic development. B) make a nation's currency tradable. C) discourage entrepreneurship. D) encourage small business ownership.
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Contemporary governments promote business development by
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A) increasing business regulations. B) encouraging government ownership of businesses. C) permitting businesspeople to conduct business without the use of contracts. D) establishing a currency that is tradable in world markets.
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What policies would tend to foster entrepreneurship? A) Minimize taxes and regulations. B) Promote more regulations to protect the environment. C) Develop policies to reduce corruption between individuals. D) Encourage government ownership of businesses.
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When corruption is present in the business environment, what often occurs? A) Company leaders threaten competitors and minimize competition. B) Factories are easier to build without a government permit. C) Fair competition thrives. D) Laborers can make more money.
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Which government policies would be least likely to encourage entrepreneurship?
A) passage of laws that enable businesspeople to write enforceable contracts B) establishment of a currency that is tradable in world markets C) establishment of strict regulations specifying exactly how products should be made to ensure safety and affordability D) passage of laws that eliminate corruption in government and business
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59) When Netflix determined that the lifestyle needs of its customers called for more convenient methods to receive entertainment, it implemented a business model that led to a reduction in the company’s labor costs. The company then passed those savings on to consumers. In comparison, Blockbuster video stores did not pay enough attention to competitor movements, permitting Netflix to quickly capture this market share and as a result, Blockbuster shuttered its doors. Which external environment probably had the least effect on Netflix's success? A) social environment B) competitive environment C) economic and legal environment D) technological environment
60) Jay sells custom bicycles. He buys bike parts from five different suppliers. Although several government-supported regulations help Jay in his business, regulations that make it easy for his business to enjoy good vendor relationships are A) lower taxes that business-to-business customers pay to each other. B) laws that permit minimal corruption in banking institutions. C) laws that permit small businesses to use the government as an intermediary when doing business with other small businesses. D) laws that support enforceable contracts between firms.
61) Daniel owns a lawn irrigation system business. When he started the business 10 years ago, he promised to always operate within the legal limits of the law, but lately, the competition is eating him alive. Large competitors hire undocumented workers to perform the manual labor, and they do not pay taxes on these employees—they just pay them in cash at the end of the week. Daniel does not want to hire illegal workers, but employment taxes are decreasing his profits. There is a risk if you permit an illegal worker to drive a truck, or, if they have an accident on the job. You have just studied business ethics in your class. You inform Daniel that
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A) taxes only need to be paid for the owners. B) he is not only taking a chance that a bigger problem may occur, he is indirectly setting the ethics code for his business. C) small businesses do not need to worry about ethics codes. This concern is better suited for big business. D) it is not unethical to try to provide jobs.
62) The emergence of an information-based economy are important parts of the __________ environment in which businesses operate. A) economic and legal B) technological C) competitive D) social
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Technology affects people in A) all industries. B) most industries. C) a few information technology industries. D) primarily high-income countries.
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Employers provide tools and technology for their employees in order to A) increase the cost of production and profitability. B) improve their efficiency and productivity. C) reduce corruption in business and eliminate scandals. D) encourage the private ownership of businesses.
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Efficiency means A) producing the desired result. B) producing goods and services using the least amount of resources. C) the amount of output you generate given the amount of input. D) the buying and selling of goods using the most amount of resources.
66) __________ refers to the amount of output generated with a given amount of input, e.g., the number of pizzas produced per worker per hour. A) Efficiency B) Technology C) Competence D) Productivity
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__________ means producing the desired result. A) Effectiveness B) Technology C) Efficiency D) Productivity
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__________ means producing items using the least amount of resources. A) Efficiency B) Technology C) Competence D) Productivity
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The two major types of e-commerce are
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A) online and offline. B) EDI and EDC. C) wholesale and retail. D) B2B and B2C.
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When businesses sell to other businesses online, these transactions are known as A) B2C transactions. B) e-wholesale transactions. C) B2B transactions. D) hidden transactions.
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Companies that sell goods to consumers online are engaging in __________ transactions. A) B2C B) RFP C) B2B D) Y2K
72) The series of lines on a product packaging that the cashier scans when you check out at a grocery store or discount store is called a A) bar code. B) zip code. C) scan code. D) laser code.
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An electronic storage file where firms keep customer information is known as a(n)
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A) app. B) management information system. C) database. D) B2C system.
74) __________ is illegally obtaining and illegally using private information about a person, such as using someone's credit card number. A) Petty theft B) Identity theft C) Banking theft D) Online theft
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One advantage of a database is it
A) permits a retail store to directly gather information on the customers who do business with its competitors, so it can target promotional materials to those people. B) creates efficiency in that the store can quickly replenish items that are purchased. C) prevents identity theft. D) prevents stores from exchanging customer information with each other.
76) What aspect of e-commerce will continue growing in importance to both businesses and consumers? A) customer focus groups B) cybersecurity C) personal selling D) alternative currencies
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What is an advantage of utilizing technology in business? A) Technology increases the cost of production. B) Technology reduces the need for a marketing plan. C) Productivity increases. D) Management can distance itself from the demands of stakeholders.
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Which statement best describes the main difference between B2B and B2C transactions?
A) B2B transactions involve transactions where the buyers and sellers are both businesses, while B2C involves transactions between businesses and consumers. B) B2B transactions focus on financial transactions while B2C e-commerce focuses on the sale of manufactured goods. C) B2B transactions refer to business between nonprofit organizations while B2C ecommerce is carried out by business firms seeking to earn a profit. D) B2B transactions involve sales in foreign markets while B2C e-commerce is restricted to domestic markets.
79) Businesses like Earth Angel and Bubbly Dynamics described in the "Adapting to Change" box reuse, redistribute, refurbish or recycle products instead of adding them to landfills. This circular economy strategy focuses on using technology to A) improve productivity. B) create empowerment. C) increase sustainability. D) develop customer responsiveness.
80) WebSure is an online company that provides support services for businesses that need help in setting up and maintaining their websites. WebSure is an example of a company that is engaged in __________ e-commerce.
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A) B2C B) C2C C) Y2K D) B2B
81) Prestige Presents specializes in expensive and unusual gifts for all occasions. It keeps a large file of information on all of its regular customers, including names, addresses, and type of gifts they have ordered in the past, and the size and frequency of their orders. The electronic file which stores this information is a(n) A) spreadsheet. B) MP3 file. C) PERT file. D) database.
82) New orders are coming in quickly for Data Boom, and management is confident that new contracts will take them through the next couple of years. The company has started investing again, but not in people. The number of employees is the same as when the company and its competitors faced recent economic downturns. Most likely due to __________, the company is producing more product and services with less people. A) the lack of skilled labor B) new competition C) social changes D) technological advancement
83) After purchasing a new set of golf clubs, Ray noticed he was receiving e-mail advertisements from various golf resorts even though he had not requested information from any of them. What statement likely explains why this is happening?
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A) Ray was a victim of identity theft. B) Ray's personal information was collected by a business, which then traded it to other companies, and these companies then began targeting their advertisements. C) All businesses routinely have all customers' personal information. D) Ray's employer gave his information to the marketers.
84) Bree wants to compare the price of running shoes she saw at a sporting goods store with other retailers that may have the same shoes. She locates the product on three different websites, including Zappos. Bree's quest is an example of how customers are using __________ to solve problems. A) ad comparison B) databases C) information technology D) social networking
85) Stuart Johnson renewed his membership at Bargain Barn. Shortly after renewing the card, Stuart started receiving calls from collection agencies claiming that he owed money. He quickly learned that another Stuart Johnson also owned a Bargain Barn card and missed many payments. Bargain Barn had linked Stuart's personal information with the other Stuart Johnson's personal information. Stuart experienced A) buyer's remorse. B) database fraud. C) purchase tracking. D) identity theft.
86) Opportunities and advancements in the technological environment during the past 20 years have opened the doors for a number of products that enhance the lives of consumers. Identity theft and other forms of cybercrime are also by-products of these technological advancements. Which statement describes a form of identity theft?
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A) smartphone apps that permit the consumer to price-compare by scanning the barcode of a product, such as a backpack B) hacking into a business's database to obtain customer credit card numbers, and then selling those numbers to others for use C) GPS technology that permits you to find the exact location of a person, by entering that person's phone number into your application D) the application of cookies to a consumer's computer system that identify their purchasing patterns.
87) Bethany got a call yesterday from First Bank, the company that issued her credit card, inquiring about an $105.00 charge made in Jamaica. Upon learning that Bethany was at home in Minnesota and had not made this purchase, the bank quickly took steps to cancel the card and issue a new one. Given the circumstances that Bethany's credit card number had an illegal transaction, the best course of action is to A) check her computer's firewall to make sure it is working. B) cancel her account and eliminate credit cards from her life. C) change her passwords and store them in a password manager. D) diversify her spending habits by using one of several credit cards when making purchases.
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In today's competitive environment, good value means A) making products with zero defects. B) superior quality that translates into durable products. C) offering the latest trends without seeming like you are over the top. D) providing quality products and services at competitive prices.
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In today’s competitive environment, successful businesses are keenly focused on their
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A) customers. B) managers. C) creditors. D) suppliers.
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Empowerment means A) giving employees the authority to make decisions. B) making certain that employees always defer to management when making decisions. C) hiring employees that do not require training, due to the costly nature of this activity. D) asking employees to write the policies which govern their jobs.
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Empowerment requires managers to focus more on __________ lower-level employees. A) directly supervising B) training C) eliminating D) controlling and correcting
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To implement a policy of empowerment, the organization will restructure so that A) managers have more responsibility and employees learn to follow directions. B) employees assume more responsibility. C) workers agree to work overtime without extra pay. D) an entire level of management is removed from the organization.
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Which statement about the competitive environment is most accurate?
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A) Firms that produce a quality product will always succeed in the competitive marketplace. B) Traditional firms will be unable to successfully compete against the new online firms unless they immediately create a way to reach customers through the Internet. C) Firms that empower their employees will continue to perform poorly in the competitive environment. D) Companies now have to offer both high-quality products and outstanding service at competitive prices.
94) In order to compete well and gain market share, contemporary businesses are changing to be more A) customer-driven. B) cash-driven. C) management-driven. D) production-driven.
95) Amir is a salesperson for Safe-T-Home Protection Services. He really appreciates the amount of freedom and authority the company gives its salespeople in order to better meet the needs of customers. Amir's experience suggests that Safe-T-Home practices A) centralized management. B) fast response theory. C) enfranchisement. D) empowerment.
96) Gabby is working as a marketing trainee for a streaming video company. Her boss called a meeting for next week with one thing on the agenda: "Bring with you your ideas about how we can gain a competitive advantage." Knowing the current competitive environment, what should Gabby suggest?
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A) Create a management-driven environment with lots of employee training. B) Create a customer-driven environment where we constantly try to create customer value. C) Restructure the organization so that there is always a manager on duty to chat with online customers who are having problems with their orders. D) Always match the promotions of our competitors; price is the only thing customers care about.
97) Garry called in a food order to feed his sales team. When he arrived to pick up, it was not what he ordered. The store associate quickly made it right, and offered a substantial discount to make up for the mistake. There was no need to check with the supervisor, and Garry was satisfied with the result. What aspect of good customer service was in place? A) high-quality products B) employee empowerment C) good value D) management supervision
98) Which statement best describes how firms must treat their frontline workers in order to remain competitive? Frontline workers must be A) empowered with the authority to respond quickly to the unmet needs of customers. B) closely supervised to reduce the risk of product liability and discrimination lawsuits. C) eliminated and replaced with automated equipment whenever possible. D) relieved of any burden to make a customer decision.
99) Nathan is in charge of production for a family-owned company that makes and sells kitchen utensils. He has stated that speed of delivery is the most important factor for success in the competitive environment. Given what you know, what would be the best response to Nathan?
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A) You are right on target, Nathan. Time is money. B) As long as our price is competitive, speedy delivery will win in today's changing marketplace. C) Well Nathan, speed isn't everything. What would exceed our customers' expectations? Some consumers may put more importance on high quality and/or lower prices. D) You couldn't be more wrong. Quality is the name of the game. He who has the best product will win in the competitive environment.
100) The statistical study of human population to learn its size, density, and characteristics is called A) psychographics. B) econometrics. C) demographics. D) geometrics.
101) Businesses collect __________ information on where people live, what they buy, and how they spend their time. A) geometric B) econometric C) demographic D) anthropologic
102) Diversity is more than recruiting and keeping minority and female employees. Diversity means appreciating and understanding other differences in our customers and in our workforce. The best description of these differences is
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A) people with disabilities, people with different sexual orientations, religious preferences, and even personality differences such as extroverts and introverts. B) people who embrace differing gender roles. C) people with differing physical characteristics such as eye or hair color. D) people with racial and gender differences.
103) Efforts are underway to serve the needs of a diverse population. Embracing diversity means A) selling products to immigrants. B) dealing sensitively with workers and cultures around the world. C) providing government programs such as free health care for illegal and legal immigrants. D) meeting employment quotas so that diverse groups are always represented in your workforce.
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What result is likely due to population shifts in the United States? A) Businesses that cater to older consumers will see higher growth. B) Businesses that cater to older consumers will see slower growth. C) Businesses that sell electronic devices will see a significant decline. D) Health care will emerge as the only business sector that will grow.
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Which industry will most likely benefit from an aging population? A) financial services to help clients plan for their education B) home health care businesses C) children's day care centers D) auto industry
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106)
Which statement is accurate about the Social Security system?
A) It continues to burden businesses because businesses must provide and pay for this benefit for their employees. B) It met the needs of our nation when it was first introduced, but needs an overhaul. C) It will continue to serve the needs of U.S. citizens into the distant future, because there are so few retirees placing a strain on it. D) It is failing because the U.S. government failed to invest the money that employees contributed.
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People over 75 years old represent A) the unemployed generation. B) the lowest income generation. C) the richest demographic group in the United States. D) a group that has never contributed to Social Security.
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Businesses are supporting single-parent families with A) increased Social Security benefits. B) a more lenient welfare system. C) more flexible work benefits such as flextime and family leave. D) bonus payments for childcare needs.
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What group is expected to soon become the largest consumer group in the world? A) people over age 75 B) Baby Boomers C) Generation Z D) Generation X
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110)
Which statement about demography is most accurate? Demographic studies A) focus on factors that have great political relevance, but little relevance to business
firms. B) suggest that the number of single-parent families is declining. C) provide businesses and individuals with insights into business and career opportunities for the future. D) are an important source of information about changes in health patterns.
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Which business policy would most likely help a single-parent family? A) requiring the employee to work regularly scheduled hours each day B) allowing sick leave to be used only if the employee is ill C) requiring education outside of regular business hours to help the employee advance D) allowing family leave and flextime
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The immigrant population (both legal and illegal) is having the most dramatic effect on A) car and truck makers. B) the mining and minerals industry. C) schools, hospitals, and other services industries. D) the ice cream and confection industry.
113)
Retired people will be draining the U.S. economy of wealth. This is due to
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A) the fact that most have smoked all their lives and now are accumulating large healthcare bills. B) the fact there are not enough workers in subsequent generations to support the ongoing drain of older persons entering the Social Security system. C) their lack of interest in supporting restaurants, resorts, educational institutions, and service-intensive companies. D) the fact that they refuse to use current information technology to improve efficiency.
114) If you were to discuss and analyze the social changes affecting the future of business, which statement should be part of that conversation? A) It is becoming more difficult to provide expert prenatal care for women, resulting in a negative impact on the future of childbirth. B) The increase in older citizens may impact an employee's take-home pay if programs such as Social Security will need to be funded at a higher level. Skilled employees may require higher wages to make up the shortfall. C) With less money to spend, older Americans over 65 will no longer require transportation, entertainment, education, and lodging. This is highly likely to negatively impact these industries. D) Business taxes are likely to spike due to the fact that welfare laws are making it relatively easy for single parents to stay home with their children, rather than find jobs.
115) What statement accurately reflects how businesses connect with Generation Z, as described in the "Connecting through Social Media" box? A) Generation Zers do all their shopping online, so brick-and-mortar stores do not need to feature goods or services appealing to them. B) Retailers mostly ignore this group, as Generation Z is not a large enough demographic group to interest most businesses. C) Generation Zers avoid online shopping, so businesses focus on reaching them through traditional advertising and clever in-store displays. D) Businesses must be versatile in engaging Generation Z consumers, for example, by creating tools which can be used on the major social media platforms they are already using.
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116) Olivia is looking into opening a day care in her community. She is aware of many singleparent families that need a place for their children to stay while they work, but she is concerned about the long-term prospects for such a business. Olivia thinks the future of her day care will depend on whether birth rates and the number of single-parent families keep growing. These concerns illustrate how businesses can be affected by __________ trends. A) econometric B) demographic C) geographic D) psychometric
117) Community Hospital is looking into introducing a flextime program for its employees. A group of workers who would probably benefit from flextime is A) workers who do not have access to computers at home. B) workers who have little self-motivation to work eight-hour days. C) frontline workers who frequently go out to meet with home furnishing designers. D) single-parent families.
118)
What statement is accurate about the global environment of business? A) It is a new and unknown frontier. B) It is far reaching and affects all the other business environments. C) It is rapidly shrinking in importance. D) It has not affected the United States due to its strong gross domestic product.
119)
The threat of terrorism more often __________ the cost of operating a business.
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A) increases B) decreases C) stabilizes D) determines
120)
An increase in global trade will most likely A) increase prices. B) decrease jobs. C) increase political instability. D) increase global competition.
121)
It is most accurate to say that globalization
A) has greatly improved living standards around the world. B) has significantly reduced living standards around the world. C) has opened doors to only a handful of markets. D) has greatly changed companies that hire people to sell products, but not companies that hire people to provide services.
122)
Greening refers to
A) the need for more carbon dioxide in our air. B) firms acquiring more greenbacks (U.S. dollars) from world trade. C) finding ways to save energy and lessen the harm on our environment. D) the agricultural industry's push to develop and produce new green vegetables to feed the world.
123)
Efficiency in distribution systems around the world has led to
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A) increased world trade. B) decreased world trade. C) decreased international competition. D) reduced standards of living around the world.
124)
War and terrorism in many parts of the world often lead to A) a decrease in warring nations. B) consumers spending more because they feel more patriotic. C) an increase in prosperity and peace throughout the world. D) consumer and economic hardship due to increased military spending.
125)
World trade has both benefits and costs. Which statement best attests to this fact?
A) The U.S. economy and all businesses that participate in this economy were negatively impacted by recent wars. B) The standard of living for citizens in developing nations has significantly decreased due to globalization. C) Economists are convinced that global job creation will never occur if our politicians support world trade. D) Large companies and small companies agree that the green movement is a global issue. Firms are embracing opportunities to bring value to consumers by creating green products and services.
126)
The green movement is
A) a trend that started with the U.S. government. B) concerned with depletion of natural resources. C) developing more green food products to feed the world's poor. D) our concern with the fact that everywhere we look, things are remaining green for longer periods of time.
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127)
What statement is accurate about the threat of terrorism and business?
A) It benefits most businesses because just about all companies can contribute toward averting these threats. B) It only affects companies that participate in global trade. C) It primarily affects companies that conduct business in warring nations. D) It is costly to most firms because of increased costs for security, equipment, and insurance.
128) According to the box, "Coca-Cola's Global Offerings Expand Far Beyond Soda," CocaCola competes in the global marketplace by A) focusing on selling its signature soft drink in its original packaging. B) renaming, repackaging and rebranding its original soft drink in every market. C) acquiring soft drink companies in overseas markets and quietly closing them. D) researching local tastes and adapting its products to appeal to the marketplace.
129) Zach recently graduated with honors from his college. He has bragged to his friends that his academic performance has prepared him so well for a successful career that he can find a job with ease and forget other training in his future. In evaluating the future of the workplace, Zach is A) exactly right. His past performance should carry him to success. B) completely wrong. Studies show that a college education has little to do with success. C) overconfident. Global competition means that continuous learning will be needed in the future to adapt to rapid changes. D) probably right. Specialized training today is a key to continued success in the future.
130)
Which statement describes a recurring theme about today's ecological environment?
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A) Most people agree that there is strong evidence that the temperature of the planet is going down. B) Smart businesses know that green business is currently a trend and they should proceed with caution because most green initiatives are more costly than wars and terrorism. C) There is a strong incentive for businesses to develop products and services that clearly save energy. D) Clearly, the greening issue is an American trend that has not captured the attention of the international business community.
131)
Since the 1800s, the U.S. has evolved
A) straight from an agrarian economy to an information technology economy. B) from a business to business economy to a business to consumer economy. C) from an agrarian economy to a manufacturing economy to a service-oriented economy. D) from a manufacturing economy to a service economy, to a cottage economy, and now we are trending back to an agrarian economy.
132) the
Businesses that produce and sell tangible products such as steel and machines are part of
A) manufacturing industry. B) knowledge-based industry. C) service industry. D) social services industry.
133)
The service industry represents about __________ of U.S. workers.
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A) 25% B) 45% C) 65% D) 85%
134)
Health care, insurance, recreation, and other intangible products are provided by the A) information-based sector. B) service industry. C) industrial sector. D) manufacturing industry.
135)
Since the beginning of the 1900s, the agricultural sector of the United States has
A) seen the number of family farms more than double. B) become less and less competitive in the global economy. C) remained consistent in size and output. D) experienced a significant drop in employment, mainly because of tremendous improvements in efficiency.
136) In recent years, almost all new job creation in the United States has occurred in the __________ sector. A) service B) manufacturing C) agricultural D) telecommunications
137)
The new era of business is likely to be dominated by the
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A) service sector. B) information-based sector. C) manufacturing sector. D) natural resources sector.
138)
The value of a firm's intellectual capital refers to A) its reputation in the marketplace. B) the type and success of its financial strategies. C) its employee's knowledge and skills. D) the average educational level of management.
139) Appliance repair firms, tax consultants, law firms, and insurance companies are all business firms that are part of the __________ sector. A) production B) management C) neo-industrial D) service
140) Manufacturing firms in the United States have consistently been laying off workers. Based on what you have learned, the best explanation of this trend is that A) firms have been trying to weaken unions by reducing their reliance on labor. B) workers in the United States have become less productive and cannot compete in the global economy. C) firms in many industries have become so efficient that they need fewer workers. D) the economy has been in a prolonged depression that has lasted more than a decade.
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141)
Which statement best describes recent job growth in the service sector?
A) The service sector has generated almost all new jobs in the American economy since the mid-1980s, but the rate of job growth in services has slowed in recent years. B) Jobs in the service sector have increased slowly over the past decade, but most new jobs are created in the manufacturing industries. C) Employment in the service sector has declined in recent years, and this decline is expected to continue. D) There has been little change in the number of jobs in the service sector in recent years; however, employment is expected to increase rapidly.
142)
Which organization is an example of the goods-producing sector of the economy? A) Samsung Electronics B) Princeton University C) Bank of America D) Barnes Hospital
143) Certain industries of the U.S. economy, such as farming and heavy equipment manufacturing, have experienced a significant decline in employment. Which statement best explains this job loss? A) The cause is a decline in the productivity of labor in these industries. B) Workers lost these jobs because technological advances increased productivity. C) The U.S. economy cannot compete in these industries any longer. D) Government regulations have eliminated profit opportunities in these industries.
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144) Eli Moneybags works for Second Commercial Bank, one of the largest banks in the Southwestern U.S. He is a loan officer, specializing in mortgages. Tio Jaime, Eli's favorite (and wealthiest) uncle, passed away last month and left him a sizable amount of money. Eli is looking at the best way to invest his newly acquired wealth. He is considering many options, ranging from simply putting the money into a savings account to the possibility of starting his own business. Although his bank job pays well and offers pleasant working conditions, Eli is frustrated because he has little freedom or flexibility to deal with customers since every decision he makes must be approved by his supervisor. He is also a bit bored and looking for a new challenge. He thinks he might get a lot of satisfaction from owning his own business. Eli has not made a definite decision yet, but has talked to a lot of people searching for a good idea for a new business. If he can come up with an idea he likes, he might just quit his current job and use his inheritance to go into business for himself!
144.1) As he starts his research, Eli notices that some opportunities appear to be riskier than others. When considering various opportunities, Eli should keep in mind that A) he will be better off picking a low-risk business opportunity since the safest ones are usually the most profitable as well. B) even though some opportunities appear riskier than others, the level of risk actually varies little from one opportunity to another. C) high-risk business opportunities often have the potential for high returns as well. D) government regulations are in place to protect investors and entrepreneurs from failure, so there is no need to worry about risk.
144.2) Eli's frustration with his lack of freedom at work indicates that Second Commercial A) prefers the use of cross-functional teams rather than individual initiative. B) has not adopted a strategy of empowerment. C) knows that the best way to ensure good customer service is to closely monitor its lower-level employees. D) is trying to please customers as well as other stakeholders.
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144.3) Two of his friends approached Eli with a proposal to start a language school. Eli is fluent in English and Spanish, and also has an education degree. He is strongly considering the idea but wants to know if there is a growing demand for his services. He learns that an important demographic trend is A) the service sector is likely to decline in significance in the next few years. B) the number of young children in the United States will decrease significantly over the next few years as the population of the country levels off. C) the number of immigrants is increasing steadily in his area and across the nation. Professionals in hospitals and schools need to know how to speak more than one language. D) the number of retirees is decreasing, making way for a younger generation.
144.4) As he explores his options for starting a new business, Eli has looked into the tax implications and government regulations that he would encounter. He wants to maintain an office in a different location from his home. He has discovered that some nearby communities offer tax credits and lower taxes than his town. His decision will be influenced by the __________ environment. A) demographic B) technological C) social D) economic and legal
144.5) If Eli starts his own business, his firm's activities and policies will impact many different groups of stakeholders, including employees, customers, creditors, suppliers, and people living in the community where his business is located. Which statement represents how Eli should deal with these various groups? Eli should
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A) take the needs of all these groups into account, and try to satisfy each group as much as possible. B) concentrate on meeting the needs of his customers, since they are crucial to the success of his business, but ignore the needs of other groups in order to keep costs low. C) satisfy whichever group complains the loudest, using the "squeaky wheel gets the grease" philosophy. D) concentrate on maximizing his own profits and let everyone else look out for themselves.
145)
Businesses provide goods, jobs, and services to others. ⊚ true ⊚ false
146)
Businesses seek to earn a profit by providing goods and services to others. ⊚ true ⊚ false
147) Revenue is the amount a business earns above and beyond what it spends for expenses and costs. ⊚ true ⊚ false
148) Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses. ⊚ true ⊚ false
149)
Since all businesses make a profit, starting a business is not risky.
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⊚ ⊚
true false
150)
An entrepreneur risks time and money to start and manage a business. ⊚ true ⊚ false
151)
If a business's costs and expenses are greater than its revenue, it will suffer a loss. ⊚ true ⊚ false
152)
Profits of a business include the salaries paid to its employees. ⊚ true ⊚ false
153) Revenue is the total amount of money a business takes in during a given period by selling goods and services. ⊚ true ⊚ false
154) Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. ⊚ true ⊚ false
155)
The United States is considered to have a high standard of living.
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⊚ ⊚
true false
156) The term "standard of living" refers to the amount of debt people incur on a given income. ⊚ true ⊚ false
157) Health care availability, a clean environment, and good schools all contribute to a high quality of life. ⊚ true ⊚ false
158) Maintaining a high quality of life requires the combined efforts of businesses, nonprofit organizations, and government agencies. ⊚ true ⊚ false
159) Stakeholders are all the people who stand to gain or lose by the policies and activities of a business. ⊚ true ⊚ false
160) Stakeholders include customers, employees, stockholders, suppliers, dealers, bankers, government officials, and environmentalists. ⊚ true ⊚ false
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161)
Outsourcing means selling goods and services to people in other countries. ⊚ true ⊚ false
162) Outsourcing has caused complications in many states where jobs have been lost to overseas companies. ⊚ true ⊚ false
163) Insourcing refers to the practice of global companies setting up design and production facilities in the United States. ⊚ true ⊚ false
164) The knowledge and skills learned in business courses are seldom relevant to students who work for nonprofit organizations or volunteer groups. ⊚ true ⊚ false
165)
Businesses and nonprofit organizations often strive to accomplish the same objectives. ⊚ true ⊚ false
166) Nonprofit organizations use financial gains to meet stated social or educational goals of the organization rather than personal profit. ⊚ true ⊚ false
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167)
The only real purpose of a business is to make money for entrepreneurs. ⊚ true ⊚ false
168)
The only way a firm can increase its profits is to increase its sales revenue. ⊚ true ⊚ false
169) The amount of profit or loss earned by a business can be found by subtracting the firm's expenses from its revenues. ⊚ true ⊚ false
170) Nonprofit organizations are similar to for-profit businesses in that they often provide goods and services that satisfy the needs of society. ⊚ true ⊚ false
171) Unlike businesses, employees of nonprofit organizations are not required to learn the business skills of information management, marketing, or financial management. ⊚ true ⊚ false
172) Business decisions should consider the interests of customers, employees, suppliers, government leaders, and stockholders. ⊚ true ⊚ false
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173) Businesses satisfy the demands of all stakeholders by balancing the demands of customers and stockholders. ⊚ true ⊚ false
174)
An effort to please one group of stakeholders eventually pleases all stakeholders. ⊚ true ⊚ false
175)
Insourcing creates new jobs and helps offset the number of jobs being outsourced. ⊚ true ⊚ false
176) Aliyah has started a mobile salon service. While she recognizes the risks involved in operating a business, she is still willing to invest her time, effort, and money in hopes of earning a profit. Aliyah is an example of an entrepreneur. ⊚ true ⊚ false
177) Elite Party Rentals, a store serving the Houston-area wedding industry, generated total revenues of $10 million while incurring expenses of $8 million. Elite Party Rentals earned a profit of $2 million. ⊚ true ⊚ false
178) Since businesses strive to earn a profit, their owners benefit at the expense of the rest of society. ⊚ true ⊚ false
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179) Trevor earned the same amount of money this year as he did last year. Thus, his standard of living must be the same as it was last year. ⊚ true ⊚ false
180) Jordan quit her job to take a less stressful position in a small town. She now earns less money and has had to cut back on her purchases of material goods, but she has more free time and really enjoys the clean air of her new home. Jordan has accepted a lower standard of living in order to enjoy a higher quality of life. ⊚ true ⊚ false
181) Political freedom, quality education, access to health care, and a clean environment are all factors that contribute to an improved quality of life. ⊚ true ⊚ false
182) People living in Boston on average earn more money than people living in Des Moines, IA. This means the citizens of Boston enjoy a higher standard of living than the citizens of Des Moines. ⊚ true ⊚ false
183) The major difference between businesses and nonprofit organizations is that only businesses can increase the standard of living, while only nonprofit organizations can improve the quality of life. ⊚ true ⊚ false
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184) A charitable organization, such as Doctors Without Borders or the Salvation Army, is classified as a for-profit organization. ⊚ true ⊚ false
185) It was recently reported that Japan succeeded in improving its people's standard of living and establishing a relatively affluent society. This report clearly indicates that both income levels and the price of goods and services rose significantly during that time period. ⊚ true ⊚ false
186) Starting a business is a riskier path toward business success than working your way up the ranks of a large business. ⊚ true ⊚ false
187)
Working as an entrepreneur is the only way to succeed in business. ⊚ true ⊚ false
188) Paid vacations and health care insurance are among the benefits provided by the government to entrepreneurs. ⊚ true ⊚ false
189) Land, sometimes called a natural resource, is the most critical factor of production in explaining why some countries are poor while others are rich.
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⊚ ⊚
true false
190)
Money is one of the five factors of production that contribute to the creation of wealth. ⊚ true ⊚ false
191)
Tools, machinery, and buildings are examples of capital resources. ⊚ true ⊚ false
192) The major advantage rich nations have over poor nations is an abundance of land and labor. ⊚ true ⊚ false
193) Entrepreneurship is one of the five factors of production that contribute to the creation of wealth. ⊚ true ⊚ false
194) Business consultant Peter Drucker said that the most important factor of production is knowledge. ⊚ true ⊚ false
195) Most business experts agree that entrepreneurship and the effective use of knowledge are the most important contributors to the creation of wealth.
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⊚ ⊚
true false
196) The business environment refers to the surrounding factors that either help or hinder the development of businesses. ⊚ true ⊚ false
197) Countries with an inadequately trained workforce and few entrepreneurs often achieve the highest levels of income by relying on a large number of workers. ⊚ true ⊚ false
198) If they wish to create more wealth, poor nations should focus on policies that increase entrepreneurship and the effective use of knowledge. ⊚ true ⊚ false
199) Jada wants to open a custom closet franchise. She decides to move to Austin, as it offers her the two most important factors, according to Peter Drucker, that would enhance the creation of wealth: labor and a growing population. ⊚ true ⊚ false
200) Salvatore recently completed his degree in management and is planning to start a business selling and installing solar energy panels. He chose Phoenix due to its warm weather and high population. Salvatore felt these factors would create a large labor pool, the most important of the five factors of production. ⊚ true ⊚ false
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201) Blake is supposed to be studying for finals but his mind keeps wandering to his uncle's successful golf resort. His uncle promised Blake a management trainee position and the opportunity to buy into the company as soon as he graduates. As he daydreams about being his own boss, Blake should realize that freedom to succeed also means freedom to fail. ⊚ true ⊚ false
202) Taxes and government regulations are part of the economic and legal environment in which businesses operate. ⊚ true ⊚ false
203) High taxes and government restrictions help to encourage entrepreneurs by providing greater incentives for people to work hard and create profit. ⊚ true ⊚ false
204) One of the best things the governments of developing countries can do to increase wealth is to minimize interference with the free exchange of goods and services. ⊚ true ⊚ false
205) In countries where businesses cannot enter into binding contracts, business owners assume additional risk. ⊚ true ⊚ false
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206) In an effort to increase wealth and their country's standard of living, many governments are taking over major industries and operating them as nonprofit organizations. ⊚ true ⊚ false
207) Because corruption and illegal activities are expected in a capitalist system and can be beneficial, there are many laws in the United States that allow for corruption. ⊚ true ⊚ false
208) One way for a government to actively promote entrepreneurship is to establish a currency that is tradable in world markets, so that you can buy and sell goods anywhere in the world using that currency. ⊚ true ⊚ false
209) Honesty, integrity, and high ethical standards are essential to a capitalist economic system like the one that operates in the United States. ⊚ true ⊚ false
210) Laws that allow companies to write enforceable contracts decrease the risk of doing business. ⊚ true ⊚ false
211) In rich countries such as the United States, changes in the level of taxation have little impact on the incentives of entrepreneurs. ⊚ true ⊚ false
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212) The failure to uphold high ethical business standards by a few companies can negatively impact the entire U.S. business community. ⊚ true ⊚ false
213) The government of a small island nation is trying to attain a higher quality of life by imposing strict regulations to protect the environment and ensure safe working conditions in its industries. The government also has established programs to help the poor, financing them by raising tax rates on businesses. These efforts will create an atmosphere that clearly encourages entrepreneurship. ⊚ true ⊚ false
214) Though it has received a lot of attention, the development of information technology (IT) has had less of an impact on the way businesses operate than most other changes. ⊚ true ⊚ false
215) An increase in productivity indicates that more can be produced in a given time period with the same amount of resources. ⊚ true ⊚ false
216)
Technology can help businesses become more efficient and productive. ⊚ true ⊚ false
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217) Productivity is the amount of output you generate given the amount of input such as hours worked. ⊚ true ⊚ false
218)
Effectiveness means producing goods and services using the least amount of resources. ⊚ true ⊚ false
219)
Effectiveness means producing the desired result. ⊚ true ⊚ false
220) Technology refers to everything that makes business operations more effective, efficient, and productive. ⊚ true ⊚ false
221)
Industries such as farming do not typically benefit from technology. ⊚ true ⊚ false
222)
E-commerce is the buying and selling of goods online. ⊚ true ⊚ false
223)
The online B2B market consists of selling goods and services to consumers.
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⊚ ⊚
true false
224) The rise of online marketing has become particularly important in doing business in the B2B markets. ⊚ true ⊚ false
225) The business-to-business segment of e-commerce is of less importance than the businessto-consumer segment of e-commerce. ⊚ true ⊚ false
226)
Technology allows firms to be more responsive to their customers' wants and needs. ⊚ true ⊚ false
227) Bar codes are a form of technology that has enhanced a company's ability to be responsive to consumer needs. ⊚ true ⊚ false
228)
An electronic storage file where information is kept is called a CPU. ⊚ true ⊚ false
229) The databases of a business often include a great deal of information about the firm's customers.
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⊚ ⊚
true false
230) Information in a database allows firms to carry only the products that the local population wants. ⊚ true ⊚ false
231) Identity theft is when individuals or firms access people's personal information and then use it for illegal purposes and activities. ⊚ true ⊚ false
232) The main difference between B2C and B2B e-commerce is that B2C is only used online, while B2B combines e-commerce with traditional (brick-and-mortar) outlets. ⊚ true ⊚ false
233) Online shoppers can take comfort in the fact that new technologies, if installed properly, are seldom used in unethical ways. ⊚ true ⊚ false
234) Elana has joined several other investors to form a new company that sells UV protection clothing to consumers online. Elana has invested in a B2C e-commerce company. ⊚ true ⊚ false
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235) Workers in a small Asian nation have enjoyed an increase in the number of holidays and a reduction in the average length of the workday. This has reduced the total number of hours they work each year. However, the output per worker is higher now than it was before the reduction in hours. These facts imply that productivity here has increased. ⊚ true ⊚ false
236) KleanRite produces industrial cleaning products for the hospitality industry. Until recently, it relied on wholesalers to distribute its products, but now it also sells directly to its B2B customers through its website. This is an example of the largest and most important type of e-commerce transaction. ⊚ true ⊚ false
237) As emerging technologies become widespread, businesses tend to find better uses for them. However, in the case of the Internet, businesses that sell B2B have not benefited from directly selling to their business customers in the same way that B2C companies have done. ⊚ true ⊚ false
238) To remain competitive in today's market, firms must produce a quality product and offer outstanding service at a reasonable price. ⊚ true ⊚ false
239)
Producing a high-quality product will ensure success in the competitive environment. ⊚ true ⊚ false
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240) Successful firms follow a customer-driven strategy, as opposed to the managementdriven strategy used in the past. ⊚ true ⊚ false
241)
Zero defects means that there is a company goal of no mistakes in making products. ⊚ true ⊚ false
242)
Today's businesses have a managerial focus rather than a customer focus. ⊚ true ⊚ false
243) Competition is fierce! One way to respond quickly to customer needs is to develop a strategy of empowering employees. ⊚ true ⊚ false
244) A policy of empowerment encourages managers to make decisions quickly for their frontline employees. ⊚ true ⊚ false
245) Empowerment means giving frontline workers the responsibility, authority, and freedom to respond quickly to customer requests. ⊚ true ⊚ false
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246) The goal of empowerment in the workplace is to prevent mistakes. Therefore, giving management more control over the actions of lower-level workers will reinforce empowerment. ⊚ true ⊚ false
247) It is important that firms are as efficient as possible. This is done by becoming management-driven for efficiency. ⊚ true ⊚ false
248) Customer-driven organizations require managers to closely direct and control their employees. ⊚ true ⊚ false
249) Steve and Jose are worthy competitors in the local home painting business. Steve recently found a supplier of cheap paint with lower durability, enabling him to lower his prices. He knows that his customers are cost-conscious. In this competitive environment, keeping the price down is all that matters. ⊚ true ⊚ false
250) Angela runs a house cleaning service. Although she and her employees could service 12 households in one day, they average eight homes per day. Angela recently restructured her crew and provided each housekeeper with an incentive to acquire two new customers each month through customer referrals. As a recent business graduate, you would tell her she's probably on the right track. ⊚ true ⊚ false
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251) The statistical study of the human population to describe its size, age, gender, and income is known as diversity recognition. ⊚ true ⊚ false
252) The U.S. population tends to buy the same things and spend time in roughly the same way as people did a decade ago. ⊚ true ⊚ false
253)
Demographic changes create new business opportunities. ⊚ true ⊚ false
254) Diversity groups identified in the market today can include extroverts, introverts, atheists, and the religious. ⊚ true ⊚ false
255) Companies have responded to a diverse customer base by hiring a more diverse workforce. ⊚ true ⊚ false
256)
Currently people between the ages of 45 and 54 are the richest group in the United States. ⊚ true ⊚ false
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257) New welfare rules have encouraged many businesses to implement flexible policies designed to retain workers. ⊚ true ⊚ false
258) In some cities, the number of legal and illegal immigrants has caused governments to adapt by changing signs and forms to other languages. ⊚ true ⊚ false
259) One factor that has had a major effect on businesses is the growth of single-parent families. ⊚ true ⊚ false
260)
Businesses that cater to older consumers in the future will likely not be successful. ⊚ true ⊚ false
261) Millennials, defined as those born in the late 1980s and early 1990s, will remain the largest group of consumers in the world within the next decade. ⊚ true ⊚ false
262) Businesses use demographic studies to understand where people live, their lifestyles, and what they are likely to buy. ⊚ true ⊚ false
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263) Diversity management would not be an issue if firms would treat all their employees the same. ⊚ true ⊚ false
264) Demographic trends suggest that businesses will benefit from offering flexible work schedules, elder care, and childcare to help employees balance the demands of job and family. ⊚ true ⊚ false
265) The current Social Security system ensures that the young people of today will have Social Security benefits in the future when they retire. ⊚ true ⊚ false
266) Carson plans to invest in a home health care business. He believes this will be a profitable venture because of the increasing number of people in theUnited States that will be over 65 years of age in the near future and more likely to need this type of service. This accurately describes a demographic trend that will affect his business choice. ⊚ true ⊚ false
267) Anya is a single mother of small children. Her employer is considering providing family leave. Since she is a single mom with two young children, she is unlikely to benefit from this program. ⊚ true ⊚ false
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268) Michael, age 23, is shopping for furnishings for his first apartment. Companies are designing and developing products, such as app-controlled lamps and appliances, that specifically appeal to consumers in this large demographic group. ⊚ true ⊚ false
269)
Globalization has increased among nations. ⊚ true ⊚ false
270) An important environmental change in the global environment is the growth of international competition. ⊚ true ⊚ false
271)
Improved distribution systems have led to more global trade. ⊚ true ⊚ false
272)
Global trade has suffered because of increased problems with the Internet. ⊚ true ⊚ false
273)
Globalization has greatly increased living standards around the world. ⊚ true ⊚ false
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274)
China and India have become major U.S. competitors. ⊚ true ⊚ false
275)
The threat of terrorism increases the costs of operating most businesses. ⊚ true ⊚ false
276)
Wars are costly to all companies. ⊚ true ⊚ false
277) War and terrorism have had a significant effect in drawing many resources away from the U.S. economy and led to many additional costs for businesses. ⊚ true ⊚ false
278) In most industries, the only producers that pose a serious threat to U.S. manufacturers are those in Japan and Western Europe. ⊚ true ⊚ false
279) Companies that participate in the defense industry by making weapons or armored vehicles do well whenthe United States is at war. ⊚ true ⊚ false
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280) One of the problems with globalization is that distribution systems and communication systems lack efficiency. ⊚ true ⊚ false
281) The evidence for climate change is highly suspect. Most U.S. companies are taking a wait-and-see approach toward addressing climate change. ⊚ true ⊚ false
282) After several years of working and going to school part time, Fernando recently earned a degree in marketing at a local college. The growth in global markets may increase Fernando's job opportunities, but it will also require him to continually update his skills or seek additional education. ⊚ true ⊚ false
283)
The nature of U.S. business has changed little from century to century. ⊚ true ⊚ false
284)
The number of U.S. jobs in manufacturing has increased in the past five years. ⊚ true ⊚ false
285)
Technology helped the manufacturing industry to become more productive.
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⊚ ⊚
true false
286) While the proportion of workers employed in agriculture has remained relatively constant, the average size of farms has steadily decreased over the past century. ⊚ true ⊚ false
287)
Increases in productivity have allowed fewer farmers to feed more and more people. ⊚ true ⊚ false
288)
The advice provided by an interior designer is an example of the service industry. ⊚ true ⊚ false
289) Almost all the growth in employment opportunities since the mid-1980s has been generated by the service sector. ⊚ true ⊚ false
290) Although employment in the service sector has increased rapidly in recent years, the vast majority of workers are still employed in the goods-producing sector. ⊚ true ⊚ false
291) There are currently more high-paying jobs in the service sector than in the goodsproducing sector.
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⊚ ⊚
true false
292) The best employment strategy for today's college graduates is to search for jobs that are closely related to their college major. ⊚ true ⊚ false
293) The growth in the service sector in the United States appears to be giving way to an information-based global era. ⊚ true ⊚ false
294) One reason given for the decline in the number of U.S. workers employed in manufacturing is that manufacturing firms in the U.S. have become more efficient. ⊚ true ⊚ false
295) The continuing increase in the number ofUnited States workers in the service sector means that more and more workers are employed in low-wage positions. ⊚ true ⊚ false
296) Historically, jobs lost in one sector of the economy have been replaced by increased employment opportunities in other sectors. ⊚ true ⊚ false
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297) The importance of intellectual capital to a company's value is expected to remain stagnant over the next decade. ⊚ true ⊚ false
298) Darius is a financial planner who helps people find ways to save for retirement and lower their taxes. Darius is employed in the service sector of the economy. ⊚ true ⊚ false
299) After losing her manufacturing job in the U.S. automobile industry, Nia has found that well-paid service-sector jobs require retraining and further education. ⊚ true ⊚ false
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Answer Key Test name: chapter 1 7) C 8) A 9) A 10) B 11) B 12) B 13) D 14) A 15) B 16) D 17) C 18) C 19) A 20) D 21) D 22) A 23) B 24) A 25) C 26) C 27) D 28) A 29) B 30) C 31) C 32) B
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33) B 34) D 35) B 36) C 37) C 38) D 39) A 40) C 41) A 42) C 43) C 44) B 45) D 46) D 47) C 48) C 49) C 50) A 51) A 52) B 53) A 54) C 55) D 56) A 57) A 58) C 59) C 60) D 61) B 62) B
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63) A 64) B 65) B 66) D 67) A 68) A 69) D 70) C 71) A 72) A 73) C 74) B 75) B 76) B 77) C 78) A 79) C 80) D 81) D 82) D 83) B 84) C 85) D 86) B 87) C 88) D 89) A 90) A 91) B 92) B
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93) D 94) A 95) D 96) B 97) B 98) A 99) C 100) C 101) C 102) A 103) B 104) A 105) B 106) B 107) C 108) C 109) C 110) C 111) D 112) C 113) B 114) B 115) D 116) B 117) D 118) B 119) A 120) D 121) A 122) C
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123) A 124) D 125) D 126) B 127) D 128) D 129) C 130) C 131) C 132) A 133) D 134) B 135) D 136) A 137) B 138) C 139) D 140) C 141) A 142) A 143) B 144) Section Break 144.1) C 144.2) B 144.3) C 144.4) D 144.5) A 145) TRUE 146) TRUE 147) FALSE
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148) TRUE 149) FALSE 150) TRUE 151) TRUE 152) FALSE 153) TRUE 154) TRUE 155) TRUE 156) FALSE 157) TRUE 158) TRUE 159) TRUE 160) TRUE 161) FALSE 162) TRUE 163) TRUE 164) FALSE 165) TRUE 166) TRUE 167) FALSE 168) FALSE 169) TRUE 170) TRUE 171) FALSE 172) TRUE 173) FALSE 174) FALSE 175) TRUE 176) TRUE 177) TRUE
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178) FALSE 179) FALSE 180) TRUE 181) TRUE 182) FALSE 183) FALSE 184) FALSE 185) FALSE 186) TRUE 187) FALSE 188) FALSE 189) FALSE 190) FALSE 191) TRUE 192) FALSE 193) TRUE 194) TRUE 195) TRUE 196) TRUE 197) FALSE 198) TRUE 199) FALSE 200) FALSE 201) TRUE 202) TRUE 203) FALSE 204) TRUE 205) TRUE 206) FALSE 207) FALSE
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208) TRUE 209) TRUE 210) TRUE 211) FALSE 212) TRUE 213) FALSE 214) FALSE 215) TRUE 216) TRUE 217) TRUE 218) FALSE 219) TRUE 220) TRUE 221) FALSE 222) TRUE 223) FALSE 224) TRUE 225) FALSE 226) TRUE 227) TRUE 228) FALSE 229) TRUE 230) TRUE 231) TRUE 232) FALSE 233) FALSE 234) TRUE 235) TRUE 236) TRUE 237) FALSE
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238) TRUE 239) FALSE 240) TRUE 241) TRUE 242) FALSE 243) TRUE 244) FALSE 245) TRUE 246) FALSE 247) FALSE 248) FALSE 249) FALSE 250) TRUE 251) FALSE 252) FALSE 253) TRUE 254) TRUE 255) TRUE 256) FALSE 257) TRUE 258) TRUE 259) TRUE 260) FALSE 261) FALSE 262) TRUE 263) FALSE 264) TRUE 265) FALSE 266) TRUE 267) FALSE
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268) TRUE 269) TRUE 270) TRUE 271) TRUE 272) FALSE 273) TRUE 274) TRUE 275) TRUE 276) FALSE 277) TRUE 278) FALSE 279) TRUE 280) FALSE 281) FALSE 282) TRUE 283) FALSE 284) FALSE 285) TRUE 286) FALSE 287) TRUE 288) TRUE 289) TRUE 290) FALSE 291) TRUE 292) FALSE 293) TRUE 294) TRUE 295) FALSE 296) TRUE 297) FALSE
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298) TRUE 299) TRUE
Student name:__________ 1) Discuss the views of economist Adam Smith. How does the "invisible hand" philosophy suggested by Smith benefit society as a whole?
2)
Explain the significance of "price" in a free-market economic system.
3)
Identify and describe the four basic rights that form the foundation of capitalism.
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4) When describing the state of the U.S. economy, reporters often refer to the nation's GDP, its unemployment rate, and the CPI. Explain what each of these terms means and why each measure is significant.
5) Compare and contrast fiscal policy and monetary policy. Discuss how each of these approaches can be used to influence the state of the economy.
6)
Economics is the study of how a society
A) invests wisely in the stock market. B) employs resources to produce goods and services and distribute them among competing groups and individuals. C) employs statistical techniques to make predictions about the evolution of society over the long run. D) governs itself for the good of its citizens.
7) __________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals. A) Economics B) Demographics C) Marketing D) Finance
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8)
__________ studies the operation of a nation's economy as a whole. A) Microeconomics B) Socioeconomics C) Econometrics D) Macroeconomics
9) __________ looks at the behavior of individual people and organizations in specific markets. A) Macroeconomics B) Fiscal policy C) Microeconomics D) Monetary policy
10)
Resource development is
A) the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among competing groups. B) the study of how to increase the amount of available resources and create conditions that will make better use of these resources. C) the part of economics that looks at the operation of a nation's economy as a whole. D) the part of economics that looks at particular markets.
11) The study of how to increase the amount of available resources and create conditions that will make better use of these resources is known as
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A) human resource management. B) microeconomics. C) economic progression. D) resource development.
12)
Economist Thomas Malthus believed that __________ would limit economic progress. A) depletion of gold reserves B) overpopulation C) high tax rates D) widespread poverty
13)
A key to economic growth and development is to A) locate more deposits of gold and other precious metals. B) emphasize a fair and equitable distribution of income. C) provide people with better education. D) allow governments to guide the allocation of resources.
14)
__________ is considered to be the father of modern economics. A) John Maynard Keynes B) Adam Smith C) Thomas Piketty D) Thomas Malthus
15)
What is an important premise of Adam Smith's conclusions about economic prosperity?
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A) Individual freedom is necessary if a society is to prosper. B) Understanding the concept of survival of the fittest will lead to prosperity. C) Determining what motivates people will lead to prosperity. D) Command economies and structured markets must be in place before we can work toward prosperity.
16)
Which topic would be emphasized in a macroeconomics course? A) the factors that determine how fast a nation's economy is growing B) how a company decides the amount it will charge for one of its products C) how a consumer chooses which goods to buy D) the factors that determine the wages for labor in the mining industry
17)
Which topic would be emphasized in a microeconomics class? A) how a nation's GDP is computed B) the nation's unemployment rate C) how market conditions determine the price of a specific product D) how the government can provide adequate health care
18)
The main goal of resource development is to find ways to
A) increase the amount of resources and create conditions that will make better use of those resources. B) allocate existing resources more efficiently among competing uses. C) find the right balance between policies that promote economic growth and policies designed to promote other goals such as a fair distribution of income. D) promote the central planning of resource utilization so that resources can be allocated to best benefit society.
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19) Thomas Malthus was pessimistic about the ability of a society to achieve high standards of living for most of its citizens because he believed that A) government has a natural tendency to run deficits that would eventually bankrupt a nation. B) significant population growth would result in shortages of food and resources. C) the wealthy will never promote freedom of choice for workers. D) high tax rates would eventually undermine people's incentives to work hard and create wealth.
20)
Economics was called the "dismal science" by Thomas Carlyle because he believed that A) too many people would result in food shortages and shortages of other resources. B) it was an overly complex area of study based on mathematics. C) the world population was declining, leading to widespread labor shortages. D) there were too many old people and not enough young people to care for them.
21) Which statement explains how people working in their own self-interest produce goods, services, and wealth for others? A) By taking advantage of a vast supply of labor, people working in their own selfinterest could hire others at very low wages. B) In order to earn money and produce goods that improve lives, self-directed gain ultimately provides jobs, and subsequently wages for others. C) The government pays entrepreneurs in the United States to produce goods, services, and wealth for others. D) A portion of the entrepreneur's profit (as required by law) goes to the charity of one's choice to support the less fortunate.
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22) Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services, and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economic benefits for many. This idea was called the A) freedom theory. B) invisible hand. C) spending multiplier. D) demand accelerator.
23) In the box "World Population Could Go from Boom to Bust," the textbook describes emerging population issues. What challenge do experts say many nations will now face into the next century? A) Exploding population growth will lead to a chronic shortage of food, housing, energy and other resources. B) Population growth in developing nations will trigger political instability, while population decline in developed nations will lead to economic deterioration. C) Declining birth rates will mean that most nations will be unable to sustain stable population levels, causing an alarming drop in the global population. D) Declining birth rates and an aging population will bring widespread difficulties in maintaining a young workforce and sustained economic growth.
24) Carrie plans to open a small café in which she will be the head pastry chef. Carrie is willing to work long hours because she believes that hard work will allow her business to succeed and earn her sizeable profits. Carrie's plan is most consistent with the economic theory developed by A) Thomas Malthus. B) Karl Marx. C) Adam Smith. D) Thomas Carlyle.
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25) Walt considers himself to be a follower of Thomas Malthus. Which statement would he be most likely to make? A) The key to economic growth is to keep taxes and government regulations to a minimum. B) Command economies are more likely to encourage economic growth than freemarket economies. C) Allowing people to follow their self-interest is the best way to generate economic growth and prosperity. D) A society will not experience sustainable economic progress unless it accepts the need to limit population growth.
26)
Which statement would a follower of Adam Smith most likely make?
A) The federal government should use its ability to spend and tax to guide the decisions of businesses and consumers. B) The federal government puts too much emphasis on economic growth instead of supporting social issues. C) The federal government should focus on alleviating overpopulation. D) The federal government should give people the freedom to follow their own interests; theoretically their efforts will lead to economic growth that benefits society as a whole.
27) Jeffrey decided he could earn a nice profit by developing courses and offering one-onone help to older customers in overcoming their technology deficiencies. Although the business struggled at first, he is experiencing a good deal of success now. Jeffrey has many satisfied customers, and the business has grown to the point where he now employs several workers. Jeffrey's experience is an example of A) socialism at work. B) the principle of comparative advantage. C) the invisible hand concept. D) resource development.
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28) For many years, a senator has called for more government regulation of business. "After all," the senator said recently, "businesses are out to make a profit, not to create jobs or serve their customers. The government needs to pass more laws to require businesses to take the interests of consumers and workers into account." From these comments, it is clear that the senator A) agrees with the ideas of Thomas Malthus. B) does not accept the "invisible hand" idea brought forth by Adam Smith. C) believes that most businesses in the United States are owned by the government. D) strongly supports people's right to conduct their business lives as they see fit.
29) According to the invisible hand concept, the best way for a society to encourage the creation of jobs and the production of the products most wanted by consumers would be to A) permit government-owned industries, such as telecommunications, transportation, and energy, and operate these firms as nonprofit organizations. B) allow private ownership of businesses, but use extensive regulations to force businesses to behave as the government wishes. C) allow entrepreneurs personal freedom to follow their own self-interest. D) impose high taxes on individuals, and use the revenue to subsidize businesses to encourage them to produce the maximum rate of output.
30) A young couple living in the rural South heard about the closing of a local grocery store. Although a small operation, it served a small community that would now have to travel another 20 miles to the nearest grocery store. With help from a local realtor and banker, the couple purchased the store, remodeled it, and reopened it. As new storeowners, they had to carefully watch cash flow. As their customer base began to grow, they hired others to help with the operation. The economic benefit they created can be considered
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A) an economic intervention. B) an economic crisis control. C) the invisible hand. D) the deliberate process.
31) __________ is the name of a free-market economic system in which most factors of production and distribution—such as land, factories, railroads, and stores—are owned by individuals. A) Socialism B) Capitalism C) Communism D) Collectivism
32)
Which statement is accurate about capitalism? A) Most means of production and distribution are privately owned and operated for
profit. B) The primary function of the government is to distribute wealth more evenly. C) Utilities, health care, education, and other important services are operated by the government. D) Markets operate to carry out the decisions made by central planners.
33)
The foundation of the U.S. economic system is based on A) capitalism. B) the ideas of Thomas Malthus. C) equality. D) wealth distribution.
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34)
What is a basic right under capitalism? A) freedom of collusion B) freedom from taxation C) the right to vote D) the right to compete
35) The freedom of people to decide where they want to work and live, and what they want to buy or sell, are basic capitalist rights under A) eminent domain. B) freedom of expression. C) freedom of choice. D) freedom of competition.
36) The freedom for people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under A) the right to own private property. B) freedom of expression. C) freedom of choice. D) freedom of competition.
37) A free market is one in which decisions about what to produce and in what quantities are made by A) the Fed. B) the president. C) the market. D) Congress.
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38) In a free-market economic system, __________ is the key determinant used to signal to producers what to produce and how much to produce. A) quality B) trend C) price D) quantity
39) The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the A) supply of that product or service. B) demand for that product or service. C) elasticity of that product or service. D) utility of that product or service.
40) A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to A) decrease. B) increase. C) remain constant. D) fluctuate randomly around its equilibrium value.
41)
A simple supply curve shows a relationship between the
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A) amount of labor a firm hires and the amount of output it can produce. B) amount of time required to produce a good and the relevant production costs. C) price of a good and the quantity of that good sellers are willing to offer for sale at a specific point in time. D) amount of a good a firm produces and the amount demanded by consumers.
42) A(n) __________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period. A) demand B) supply C) utility D) equilibrium
43)
A typical demand curve shows that A) as people earn higher wages, they buy more of a specific good. B) as supply increases, the amount purchased decreases. C) people tend to buy more of a good than they really want. D) people tend to buy more of a good when its price decreases.
44) When the supply curve and demand curve for a particular good are shown together on a single graph, the point at which the two curves intersect identifies the A) total profit earned by producers. B) total amount of labor needed to produce the good. C) amount of time it takes to bring together the buyers and sellers of the good. D) equilibrium price of the good.
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45) to
When prices are free to adjust over time, in the long run, the market price of a good tends
A) rise above the equilibrium price in the long run. B) equal the equilibrium price. C) fall below the equilibrium price in the long run. D) have no specific relationship to the equilibrium price.
46)
If a shortage exists for a good in a free-market economy, the A) price of the good will rise. B) price of the good will fall. C) government will order suppliers to increase the production of that good. D) government must establish a rationing system to monitor distribution.
47) __________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product. A) Oligopoly B) Monopolistic competition C) Perfect competition D) Monopoly
48) __________ exists when a large number of firms produce goods that are similar but customers believe there is a difference. A) Perfect competition B) Monopolistic competition C) Oligopoly D) A monopoly
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49)
__________ exists when the entire supply of a good is controlled by a single seller. A) Perfect competition B) Oligopoly C) Pure capitalism D) A monopoly
50)
An oligopoly is a market that is characterized by A) one seller that totally dominates the supply of the product. B) a large number of small companies all producing very similar products. C) a few large sellers who dominate the market. D) several small firms that compete primarily by differentiating their products.
51)
Which statement about capitalism is the most accurate? A) In capitalist economies, most resources are owned by the government. B) A strength of capitalism is its ability to deal with environmental problems. C) Capitalism is characterized by unequal distribution of wealth and income. D) A drawback of capitalism is that people have little freedom to pursue their own
goals.
52) When the market price of a good is below the equilibrium price, and all other determinants are unchanged, A) the quantity demanded will be greater than the quantity supplied. B) the supply curve will be to the right of the demand curve. C) a surplus will exist in the market. D) the government will regulate the price of the good to ensure equilibrium is attained.
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53) When the market price of a good is above its equilibrium value, and all other determinants are unchanged, A) a shortage will exist in the market. B) the quantity demanded will be greater than the quantity supplied. C) the government will regulate the price of the good to ensure equilibrium is attained. D) a surplus will exist in the market.
54) Just a few sellers dominate the markets for laundry detergents, soft drinks, and automobiles. Economists would classify these markets as A) monopolistic competition. B) perfect competition. C) oligopolies. D) monopolies.
55) There's a large number of bakeries in the United States and each of these bakeries produces similar, but not identical, products. Some bakeries will claim to have the best cupcakes in town, while others specialize in breads or cookies. The bakery market is an example of A) monopolistic competition. B) perfect competition. C) an oligopoly. D) a monopoly.
56)
The presence of competition in free markets
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A) is undesirable because it results in unnecessary duplication of efforts. B) usually results in better quality and lower prices. C) is rare, since most markets eventually evolve into monopolies. D) tends to lower quality and raise prices.
57)
A benefit of a free market can be that A) businesses provide customers with quality products at fair prices. B) businesses all make the same amount of profit. C) it tends to reduce government regulation. D) it eliminates wealth inequalities in society.
58)
One of the greatest concerns associated with capitalism is that A) it rarely creates wealth. B) some people may let greed guide their behavior. C) there is little economic freedom for consumers. D) producers are unlikely to supply the goods and services that consumers value the
most.
59) Which statement most accurately identifies a limitation of the free-market economic system? A) Free-market economies offer little opportunity for the poor to work their way out of poverty. B) Free-market economies have been unable to create wealth as rapidly as other types of economic systems. C) Free-market economies are generally plagued by shortages of needed consumer goods. D) Free-market economies tend to result in unequal distribution of wealth.
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60) According to the box "Bad Medicine for Consumers?" the hypothetical pharmaceutical firm you work for recently increased the price of a chemotherapy drug from $300 to $3,000! What concern associated with capitalism best illustrates this ethical dilemma? A) Some businesspeople may let greed guide their behavior. B) The demand for chemotherapy drugs is greater than the supply. C) Thanks to many different kinds of chemotherapy drugs, there is now a surplus and prices need to increase to make a profit. D) The government regulates pharmaceutical costs and can raise or lower the price as it sees fit.
61) Jake lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Jake maintains ownership due to which basic right? A) the right to freedom of expression B) the right to freedom from want C) the right to own private property D) the right to freedom of competition
62) The market price of milk is falling. In a free-market economy, the most likely explanation of this price change is that A) the government has decided to intervene in pricing. B) there is a surplus in the market for milk. C) the supply of money has decreased. D) the equilibrium price is lower than the market price.
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63) An incredibly rare gem is used in many consumer products, including watch faces, smartphones, computer monitors, and tablets. In one year, the price of this stone has gone from $8/lb. to $107/lb. Under these circumstances, buyers are not yet ready to pay the higher price even though more companies are now looking to use it in their products. A graph of the supply and demand for this product would show A) the current price is below the equilibrium price for this rare gem. B) the current price is above the equilibrium price for this rare gem. C) the current price reflects the adjustment of quantity demanded and quantity supplied. D) consumer demand for any products using the gem will increase as the price increases.
64) The price of the Amazon Echo smart speaker is falling. In a free-market economic system where everything else is equal, the most likely explanation is A) there is a smart speaker shortage in the United States. B) sellers cannot keep up with market demand. C) the government determined that the product was not worth its price tag. D) the product has competition at the equilibrium price.
65) Jackpot Industries is a major producer of reality television shows. The company faces fierce competition from three other major producers of similar shows. Together, Jackpot Industries and its three rivals control almost all of reality television. Their market environment is called A) an oligopoly. B) a monopoly. C) monopolistic competition. D) perfect competition.
66) On its website, Papa John's Pizza compares itself to the competition with the following message: "better ingredients, better pizza." The company is looking to achieve
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A) product differentiation. B) an equilibrium price. C) a monopoly. D) a perfectly competitive market.
67)
A major premise of a socialist system is A) to make sure that the people who create wealth are allowed to keep that wealth. B) to reduce the inequality in the distribution of wealth. C) to create incentives to encourage entrepreneurs to create jobs and economic growth. D) to keep tax rates extremely low so that businesses can prosper.
68)
A major benefit of socialism is the A) ability to stimulate rapid economic growth. B) ability to keep taxes low. C) emphasis on social equality. D) emphasis on private enterprise instead of public ownership.
69) The __________ system provides the least incentive to work hard or to produce quality goods or services. A) capitalist B) socialist C) communist D) mixed economy
70)
Brain drain has occurred in many socialistic nations because
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A) an unequal distribution of income leaves most without medical and social services. B) the government does little to protect the natural environment. C) workers tend to have to work longer hours and receive fewer benefits under socialism. D) tax rates on well-paid professionals such as doctors tend to be very high.
71)
Communism is an economic system in which A) the government and private citizens own equal shares of the economic resources. B) almost all the productive resources are owned by private businesses. C) the government makes almost all the major economic decisions. D) individual consumers make all economic decisions.
72)
In recent years, most countries with communist economic and political systems have A) enjoyed periods of great prosperity. B) experienced economic depression. C) placed even more importance on individual ownership of businesses. D) created a surplus of food and goods in their economies.
73) The economic and political system in which the government owns almost all the major factors of production is called A) communism. B) capitalism. C) collectivism. D) socialism.
74)
Communist values are disappearing because
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A) people in communist nations are tired of the strong religious teachings of the system. B) communist businesses have grown too quickly and they cannot keep up with demand. C) communist leaders are all militaristic. D) food and other product shortages overwhelm citizens since the government must guess what citizens need.
75)
Which statement provides the most accurate comparison of socialism and communism?
A) Under socialism, the government owns most businesses, while under communism the church owns most businesses. B) Both socialism and communism strive to achieve a more equal distribution of income and wealth, but under communism, the government takes greater control. C) Socialism strives for an equal distribution of income, but communism wants income to go primarily to those who own and operate private businesses. D) Communism believes that the government should always strive to balance its budget, while socialism accepts deficit spending as the price of achieving true equality.
76)
Which individual would tend to favor a socialist economy? A) Nico prefers to live in a country with low marginal tax rates. B) Tina prefers to live in a country that encourages rapid economic growth. C) Lars prefers to live in a country with limited government regulation. D) Amber prefers to live in a country that promotes social equality.
77)
Which individual would tend to favor a communist economy?
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A) Yeo prefers to live in a country with low marginal tax rates. B) Sandra prefers to live in a country that encourages rapid economic growth. C) Amara prefers to live in a country where the government makes almost all the economic decisions. D) Charles prefers to live in a country with limited government regulation.
78)
One of the most significant problems faced by communist nations is A) inequality in the distribution of wealth and income. B) severe inflationary pressures due to rapid economic growth. C) too little government regulation of economic activity. D) persistent shortages of basic goods such as food and clothing.
79) When Jin moved to the United States, he experienced many differences from his home nation. Jin was dismayed to learn that public transportation in the states was limited and expensive, making it difficult to get around. For a negligible fee, the government in his home country provided public transportation for everyone. He also expected to receive a free college education, as well as mostly free health care. Although his family ran a small shop at home, he was surprised that even large businesses in the United States were privately owned. Jin's home country's economic system was more characteristic of A) pure capitalism. B) socialism. C) mercantilism. D) communism.
80) Evie is a well-educated entrepreneur who operates a small business in her home country. She wants to immigrate to the United States and apply for citizenship. "In my county, tax rates are very high," Evie explains. "The government uses my taxes to finance all sorts of social programs to help the less fortunate. While I want to help, it has really undermined the profit incentive of individuals such as me. I feel those high taxes have stunted economic growth and my own opportunities." These comments illustrate what issue facing many socialist countries?
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A) antitrust problem B) depression C) brain drain D) budget surplus
81) Recently, the government of a mid-sized country announced that it is standing behind the concept of state-owned utilities, public schools, and the communications industry of the nation. Although not all industry is owned and managed by the government, these ideas would lead one to believe that the nation prefers a __________ state. A) capitalist B) socialist C) communist D) nationalist
82)
Today, the economic systems of most nations could most accurately be classified as A) pure capitalism. B) pure socialism. C) command economies. D) mixed economies.
83)
Both socialism and communism are variations of A) command economies. B) competitive economies. C) free-market economies. D) unregulated economies.
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84)
A major trend around the world today is that
A) free-market economies are moving more toward socialism and socialist economies are moving more toward capitalism. B) productivity in the service sector is increasing much more rapidly than productivity in agriculture and manufacturing. C) governments in socialist economies are increasing their use of social programs and relying on higher tax rates to finance these programs. D) governments in countries with capitalist economies are paying less attention to environmental concerns and issues involving social equality.
85)
A command economic system is characterized by A) reliance on the forces of supply and demand to determine what is produced. B) reliance on the government to determine what is produced and who gets the output. C) an extremely rapid rate of economic growth. D) freedom of choice and freedom of competition.
86) The social and economic goals of __________ include private ownership of land and business. A) capitalism B) socialism C) communism D) command economies
87) During a recession, a government flooded several banking, financial services, and insurance firms with government funds in exchange (at least temporarily) for government ownership rights. This move signaled the government's concern that the global banking system might collapse if these firms ended up in bankruptcy. This decision for government involvement in these firms demonstrates
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A) the unforgiving nature of capitalism. B) the desire for more individuals to live under a socialist system. C) the trend of mostly capitalist nations to move toward socialism. D) the freedoms this government has under capitalism.
88) As "global" trends become "local," and as we see more opportunities to compete in the global market, the trend is for A) most nations to operate as mixed economies. B) most nations to close their doors to outside commerce. C) governments to take over all profitable industries. D) socialist nations to move toward communism and for capitalist nations to move toward socialism.
89) Over the years, the government of a medium-sized nation has focused on implementing programs that promote equality. In the short term, though, its legislators are concerned about the very slow rate of growth that has plagued its national economy. In order to address this problem, the government is likely to A) take control of more major industries. B) reduce taxes and cut back on some social programs. C) make sure to balance its budget. D) avoid the use of fiscal policies and reduce the supply of money in circulation.
90) In an effort to promote rapid growth, a country has kept taxes low, offered little regulation of business activities, and implemented only modest social programs. The government is now facing political pressure to do more to clean up the environment and to reduce inequalities of income and wealth. This government is currently taking a
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A) purely capitalist approach to achieve its economic goals, and is likely to continue doing so in the future. B) purely socialist approach to achieve its economics goals, and is likely to continue doing so in the future. C) predominately socialist approach to achieving economic goals, but the current pressures it faces suggest it is likely to adopt a more capitalist approach in the future. D) predominately capitalist approach toward achieving economic goals, but the current pressures it faces suggest it is likely to adopt a more socialist approach in the future.
91) A prime minister has called for her nation's legislators to enact new laws designed to shift the country away from socialism toward a more capitalistic system. The prime minister acknowledges that some citizens will be unhappy with the radical changes. The most likely source of dissatisfaction with a move toward capitalism is A) an overall decrease in wealth. B) less economic freedom. C) steep and immediate tax increases. D) a trend toward unequal distribution of wealth.
92) If nearly 28% of a country's citizens under the age of 65 are without health care and an advocacy group convinces its current administration to vote for basic health care for everyone, what is likely to occur? A) more rapid economic growth B) higher taxes than in past years C) increasing reliance on markets to determine economic outcomes D) an increase in the number of insurance companies
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93) A large but poor country has a government-owned telecommunication system that lags far behind other nations. In several rural areas, there is only a single landline phone for an entire village. The taxes collected for the purpose of maintaining the telephone system are meager, so expanding service is almost impossible. The government decides to sell the phone company to a private firm, which expands rapidly. It reports that even poor consumers are willing to pay for a private landline. This government decision and subsequent sale demonstrates a move toward A) nationalism. B) communism. C) socialism. D) capitalism.
94)
The U.S. economic system relies on A) the private sector to measure its economic well-being. B) industries that produce capital equipment to determine how well things are going. C) frictional unemployment statistics as the sole measure of economic health. D) key economic indicators such as GDP to measure economic progress.
95) The total value of final goods and services produced within a nation's borders in a given year is known as that nation's A) aggregate production quota. B) aggregate domestic output. C) index of aggregate economic output. D) gross domestic product.
96) Three important economic indicators of the United States are the unemployment rate, the price indices, and the
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A) debt to equity ratio (DER). B) gross resource utilization index (GRUI). C) gross domestic product (GDP). D) gross output (GO).
97)
The four basic types of unemployment are frictional, structural, seasonal, and A) cyclical. B) procedural. C) industrial. D) traditional.
98) __________ unemployment refers to persons who purposefully quit their jobs and have not yet found a new job. A) Frictional B) Structural C) Cyclical D) Seasonal
99) __________ unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs. A) Frictional B) Structural C) Cyclical D) Seasonal
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100) __________ unemployment refers to loss of jobs due to a recession or a similar downturn in the economy. A) Frictional B) Structural C) Cyclical D) Seasonal
101)
__________ unemployment results when the demand for labor varies during the year. A) Frictional B) Structural C) Cyclical D) Seasonal
102)
The __________ is a statistic used to measure the pace of inflation or deflation. A) consumer price index B) gross domestic product C) index of leading indicators D) index of inflationary trends
103)
The measure used to report price changes at the wholesale level is the A) gross domestic product (GDP). B) consumer price index (CPI). C) gross output (GO). D) producer price index (PPI).
104)
__________ refers to a general rise in the price level of goods and services over time.
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A) Acceleration B) Recession C) Inflation D) Escalation
105)
__________ is a condition characterized by slowing price increases. A) Deflation B) Disinflation C) Stagflation D) Deceleration
106)
__________ is a condition in which the average level of prices is actually falling. A) Deflation B) Disinflation C) Stagflation D) Inflation
107)
A __________ is a severe recession that is usually accompanied by deflation. A) stagflation B) retraction C) depression D) dissolution
108)
In recent years, the U.S. manufacturing sector has experienced __________ productivity.
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A) rising B) relatively stable C) declining D) rapidly declining
109) There are innovations involving new ways to produce and conserve energy. If we can turn this new technology into marketable products and services that produce energy to run our businesses and homes, the United States could see a surge in output of goods and services. What would be measured to document this surge? A) gross domestic product B) consumer price index C) consumer marginal index D) number of workers who are frictionally employed
110) In the box "Reaching Beyond Our Borders," the text describes rising prices in Venezuela in late 2018. At one point, the cash used to make even small purchases was weighed instead of counted, due to its extremely low value. During this period, Venezuelans experienced a condition that economists refer to as A) disinflation. B) deflation. C) hyperinflation. D) stagflation.
111) that
One reason the CPI is monitored very closely by government, businesses, and workers is
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A) it indicates whether we are running a budget surplus or a deficit. B) some wages, interest rates, tax rates, and government benefits are tied to changes in the value of the CPI. C) it is the best measure of worker productivity in the service sector. D) the gross domestic product is computed from the reported increases in the CPI.
112) The United States strongly relies on GDP data. However, it is only the total value of finished goods produced by the country. Officials are looking to measure total sales volume at all stages of production. What statistic would be most useful to them? A) consumer price index B) producer price index C) gross output D) productivity rate
113) What indicator provides the clearest indication that an economy is experiencing deflation? A) decrease in the unemployment rate B) decrease in GDP C) increase in the PPI D) decrease in the CPI
114)
Which statement about business cycles in the United States is most accurate? A) Business cycles occur precisely every five years. B) Long-term business cycles have only two phases—boom and bust. C) Seasonal business cycles occur within a year. D) Business cycles are impossible to identify.
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115) Which statement about productivity in the service sector of the U.S. economy is most accurate? A) Productivity in the service sector has increased much more rapidly than productivity in the manufacturing sector. B) Improving productivity in the service sector is much less important than improving productivity in the manufacturing sector, because the service sector does not really produce anything. C) Productivity in the service sector is easier to measure than productivity in agriculture. D) Measures of productivity in the service sector do a poor job of taking quality improvements into account.
116) A small country's banking system recently crashed. This eventually led to companies being unable to borrow money to run their businesses and employees needed to be terminated. These circumstances cut into consumers’ purchasing power, causing a severe decline in the prices of goods and services, better known as A) disinflation. B) deflation. C) contra inflation. D) overproduction.
117)
Which strategy may have a net effect on inflation? A) decreasing interest rates and decreasing taxes B) proportionately increasing wages and increasing prices C) decreasing prices and decreasing taxes D) proportionately increasing prices and decreasing wages
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118) In a country in the midst of a serious economic downturn, the GDP has declined steadily for over three years and is now at its lowest level in over 60 years. The unemployment rate is at an all-time high and the nation's CPI is falling. This economic condition is referred to as a A) period of stagflation. B) balance of trade deficit. C) depression. D) recovery cycle.
119) Over dinner, Ross complained about how prices have increased a great deal over the past year. Brenda disagrees, saying that the prices of some goods have gone up a bit, but other prices have declined, noting that you can get some good buys on houses right now. Ross feels that the average price of consumer goods has not changed. This couple can refer to the __________ to learn how government economists currently view the price situation. A) GDP B) CPI C) PPI D) MEW
120) Sanaa recently left her job at a large corporation because she saw little chance for advancement. Although she is still searching for a new position, she believes the economy is healthy and she hears that several firms are hiring people with her qualifications. Which statement about Sanaa's current situation is most accurate? A) Sanaa is not considered unemployed because she voluntarily quit her job. B) Sanaa is an example of cyclical unemployment. C) Sanaa is an example of frictional unemployment. D) Sanaa is likely to find employment quickly if she seeks training in a different field.
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121) Katie's company produces computers, phones, and tablets. About six months ago, Katie began to keep track of number of hours worked at the company, and the resulting output. She found that the number of workers (and the hours they worked) remained relatively steady over the past six months; however, the work site's output improved considerably. This indicates that A) productivity at the work site has increased. B) the work site sold off some of its excess inventory. C) the company's prices have increased faster than the wages paid to workers. D) the company should hire more workers.
122) Cameron is a new college graduate who just started a job as an engineering trainee for a sizeable defense company. Now that he is earning good money, he hopes to start saving for his first house and also make contributions to his retirement plan. As he looks over his monthly bills, Cameron is concerned that he will never get ahead of the game. His grocery bill, car payment, and Internet costs keep him in the "just making ends meet" group. As his mind wanders back to his college days, he reflects on a time when daily necessities seemed a lot more reasonable. Cameron is experiencing the effects of A) inflation. B) conditions of low demand. C) involuntary CPI. D) cyclical unemployment.
123) A couple recently got preapproved on a loan for their first house purchase. They are speculating on how much they should bid on their number one choice—a small, three-bedroom bungalow near a major college town. Which indicator may be an important factor in whether they are able to successfully put in a low bid? A) the federal tax rate in that area B) the unemployment rate in that area C) the producer's price index in that area D) the CMI—consumer's marginal index
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124) Ian just landed his dream job, which offers the chance to work for a company that makes gaming software and live in California at the same time. He pictures a snazzy apartment with a palm tree right outside the front door. But on a visit there, he finds that the prices of apartments are outrageous! Ian checks the Bureau of Labor Statistics site to try to get a better picture of why the cost of housing is so high in this region of the country. Which factors may be to blame? A) a low unemployment rate and increasing GDP B) a high consumer's marginal index and low PPI C) a low CPI and high state tax rate D) a decreasing core inflation rate and high unemployment
125) __________ policy refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending. A) Monetary B) Business C) Fiscal D) Cyclical
126)
Fiscal policy involves increases or decreases in A) the money supply. B) interest rates. C) government spending and taxes. D) exports and imports.
127) When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a
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A) Federal Reserve allowance. B) national surplus. C) balance of payments deficit. D) national deficit.
128)
When the government runs a continual budget deficit, it increases the A) national debt. B) balance of payments deficit. C) federal capital account. D) money supply.
129) In the United States, the __________ has the role of managing the money supply and interest rates. A) United States Treasury B) Federal Reserve Bank C) State Department D) Federal Deposit Insurance Corporation
130)
One way to lessen the U.S. government budget deficit is to A) cut spending. B) increase spending. C) decrease taxes. D) increase government social programs.
131) Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as __________ policy.
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A) fiscal B) income C) monetary D) securities
132)
The Federal Reserve Bank operates A) as a semiprivate organization not under the direct control of the government. B) under the direct control of the executive branch of the government. C) under the direction of the Banking Oversight Committee of Congress. D) as a special agency of the U.S. Treasury.
133)
Which statement about government deficit spending is most accurate?
A) The federal government violates the law by running deficits because the U.S. Constitution requires the government to balance its budget each year. B) Although the government used to run big deficits, it has consistently run surpluses since the late 1980s. C) The government has used deficit spending to lower the national debt. D) One reason the government has a hard time reducing deficits is that there is a great deal of need for new social programs each year.
134) As you are reading the online edition of your local newspaper, you quickly scan a report in the business section that says government spending will again exceed tax revenues in the current year. What does this mean for the economy? A) The total national debt is likely to increase. B) The national deficit is likely to decrease. C) The rate of inflation is likely to fall. D) The monetary policies pursued by the Fed need tightening.
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135)
Which statement about the Federal Reserve Bank (the Fed) is most accurate?
A) The Fed is an agency of the U.S. Treasury Department that has the responsibility of collecting tax receipts for the IRS. B) The Fed manages the U.S. money supply and interest rates. C) The Fed is the primary government agency involved in carrying out our nation's fiscal policies. D) The Fed is the agency of the government that ensures that the United States maintains enough gold reserves to pay any foreign debts that result from international trade.
136)
Which policy suggests Keynesian economic theory?
A) reducing government involvement in the free-market economy B) proposing long-term solutions in order to create wider swings in the business cycle C) creating a national banking system that owns and operates most of the global and regional banks D) short-term increases in government spending to stimulate the economy
137) A senator is alarmed at the state of the economy. Unemployment is high and GDP is low. The senator has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy. These actions are examples of A) monetary policy. B) fiscal policy. C) discretionary income policy. D) social investment policy.
138) The chair of the Federal Reserve Bank spoke to the American public. The message she conveyed is that Fed economists are worried about inflation and believe the best course of action would be to slow the economy. Which policy is the Fed most likely to pursue?
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A) increase taxes B) decrease interest rates C) restrict the money supply and increase interest rates D) devalue the dollar on international currency exchanges
139) Matt recently was laid off from a major U.S. auto plant. After looking unsuccessfully for work in a similar industry, he plans to start interviewing with road and bridge repair companies. Matt speculates that if the government begins to contract with companies that repair highways and bridges, he may find steady work, at least in the short term. Which statement best describes the strategy behind his thoughts? A) The best way for the government to reign in on too much money floating around the system is to hire people and pay them wages. B) Matt does not understand the causes of unemployment. If auto plants close, repairs will slow down rather than increase. C) If the current administration asks the Fed to raise interest rates, then the current administration begins contracting with road repair companies. D) By increasing government spending through road and bridge repair and construction, the government will intervene in the free-market economic system to help jump-start a weak economy.
140) The Federal Reserve Chairman publicly remarked that inflation had begun to tick upward. However, unemployment in the United States was still quite high and economic growth had slowed. With short-term interest rates close to zero, the Chair did not visualize that __________ policy would be able to do anything for the high unemployment problem. She felt that __________ policy would be more useful for bolstering employment, but that would require local and state governments and the federal government to provide tax breaks for corporations. A) federal; state B) fiscal; monetary C) monetary; fiscal D) fiscal; federal
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141) A small nation is in the middle of a severe financial crisis. The prime minister has increased government spending by trillions, in order to revive the ailing economy. Her strategy followed which economic theory? A) Malthusian B) Marxist C) Keynesian D) Monetarist
142) If businesses are producing at capacity, and the nation is experiencing almost full employment (a very low rate of unemployment—less than 2%), the Fed may decide to A) lower interest rates. B) raise taxes. C) lower taxes. D) increase interest rates.
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143) Cooper Collins is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country. Cooper was discouraged by the high tax rates there, so he immigrated to the United States seven years ago. Soon after moving to the United States, Cooper again tried his hand at entrepreneurship and opened Coop's Consulting. The company struggled at first, and almost went bankrupt midway through its second year. However, Cooper never lost faith, the company survived, and eventually developed a great reputation in the community. Coop's Consulting began experiencing sustained growth early in its fourth year. In fact, Cooper hired additional employees to keep up with the increasing workload. His company, which started with only Cooper and two other full-time workers, now provides jobs for 43 fulltime employees as well as many part-time workers and interns. Despite these past successes, business ownership is not without complications. The company suffered its first drop in business since its very early years. Cooper is convinced that the problem is not with his company, but rather due to a downturn in the United States economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the United States declined over the last quarter. The anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Cooper is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track.
143.1) Cooper created Coop's Consulting to earn a profit, but by working hard and increasing his market share, he was able to create jobs for others. This is an example of the __________ concept. A) circular flow B) invisible hand C) equitable income D) social dividend
143.2) Cooper's native country was much different from the United States. In addition to its higher tax rates, the government offered more extensive social programs that were designed to redistribute income and reduce inequality. Although small businesses were privately owned and operated in his home country, many basic industries were owned and operated by the government. From this information, you would classify this economic system as
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A) capitalism. B) socialism. C) communism. D) pluralism.
143.3) The broadcast that reported a decline in total output for the United States probably got some of its information from the government's measurement of A) GDP. B) CPI. C) the federal deficit. D) the balance of payments.
143.4) The newscast cited forecasts that national output might continue to fall in the future. If total output shows decline for two consecutive quarters, economists would classify this as a A) depression. B) retraction. C) period of stagflation. D) recession.
143.5) Cooper recently saw a report online that the Fed will try to help get the U.S. economy back on track. If the Fed takes action, Cooper will likely see A) lower interest rates. B) an increase in the size of the government's budget deficit. C) lower government spending. D) an increase in the minimum wage.
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143.6) Besides a slowdown in the general economy, Coop's Consulting faces threats of competition from several other companies that provide engineering consulting services. In order to gain more business, Cooper tries to convince potential clients that his company offers better service than the competition. He has advertised heavily in professional magazines, often quoting some of his highly satisfied clients. The market Coop's Consulting operates in is an example of A) perfect competition. B) monopoly. C) oligopoly. D) monopolistic competition.
144) U.S. business success is largely due to an economic and social climate that allows businesses to operate freely. ⊚ true ⊚ false
145) Global economics and politics have significant influence on businesses in the United States. ⊚ true ⊚ false
146) The study of how society chooses to employ resources to produce goods and services and to distribute them for consumption among various competing groups and individuals is known as demographics. ⊚ true ⊚ false
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147) Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals. ⊚ true ⊚ false
148) Microeconomics is the economic perspective that looks at the operation of a nation's economy as a whole. ⊚ true ⊚ false
149) Microeconomics focuses on the decisions and behavior of people and organizations in particular markets. ⊚ true ⊚ false
150) Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available. ⊚ true ⊚ false
151) Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources. ⊚ true ⊚ false
152) Peace and prosperity will flourish if we can find the one best way to divide existing resources among nations. ⊚ true ⊚ false
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153)
Thomas Malthus believed that overpopulation was a major cause of poverty. ⊚ true ⊚ false
154) In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future. ⊚ true ⊚ false
155) Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves. ⊚ true ⊚ false
156) Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor. ⊚ true ⊚ false
157) Adam Smith believed the self-interest of businesspeople would lead them to create needed goods, services, and jobs. ⊚ true ⊚ false
158) The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all.
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⊚ ⊚
true false
159) According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business could control a market for a particular good or service. ⊚ true ⊚ false
160) Studies about the effects of population growth on the economy are part of macroeconomics. ⊚ true ⊚ false
161) An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers. He is examining a microeconomic situation. ⊚ true ⊚ false
162) Macroeconomics looks at long-term economic problems while microeconomics examines short-term economic problems. ⊚ true ⊚ false
163) Thomas Malthus believed that people in most countries would never be able to achieve high standards of living unless the problems of overpopulation were addressed. ⊚ true ⊚ false
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164) Adam Smith believed that since businesspeople are motivated to improve their own prosperity, their actions are unlikely to benefit society as a whole. ⊚ true ⊚ false
165) Adam Smith believed that an economic system couldn't truly prosper unless people were taught to value the welfare of others above their own personal gain. ⊚ true ⊚ false
166) The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work. ⊚ true ⊚ false
167) Adam Smith's research focused on determining the best way to distribute a fixed amount of resources, rather than on how to create more wealth. ⊚ true ⊚ false
168) As indicated by the "World Population Could Go from Boom to Bust" box, the aging of the population will present economic challenges for many countries. ⊚ true ⊚ false
169) Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed.
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⊚ ⊚
true false
170) In capitalist countries, the government decides what to produce and how the goods and services will be produced. ⊚ true ⊚ false
171)
Capitalism is the foundation of the U.S. economic system. ⊚ true ⊚ false
172)
State capitalism is the combination of freer markets and some government control. ⊚ true ⊚ false
173)
The most fundamental of all rights in capitalism is the right to private property. ⊚ true ⊚ false
174) Under capitalism, the government prohibits people and businesses from competing with each other. ⊚ true ⊚ false
175)
A basic right under capitalism is the right of businesses to receive government funding.
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⊚ ⊚
176)
true false
Free-market capitalism has made it more difficult for individuals to gain wealth. ⊚ true ⊚ false
177) Due to the fundamental rights afforded to us by a free-market capitalistic system, people are more willing to take calculated risks. ⊚ true ⊚ false
178) A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed. ⊚ true ⊚ false
179) Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market. ⊚ true ⊚ false
180) Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time. ⊚ true ⊚ false
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181) At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers are supplying. ⊚ true ⊚ false
182)
If the quantity supplied in a market exceeds the quantity demanded, a shortage will exist. ⊚ true ⊚ false
183)
If a shortage exists in a market for a good, the price of that good will tend to fall. ⊚ true ⊚ false
184)
The point of intersection between the supply and demand curves is called the stress point. ⊚ true ⊚ false
185)
In the long run, the market price tends to adjust toward the equilibrium point. ⊚ true ⊚ false
186) Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services. ⊚ true ⊚ false
187) A drawback of free markets is that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run.
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⊚ ⊚
true false
188) In perfect competition, each firm produces a product that is clearly differentiated from the products of other firms in the same market. ⊚ true ⊚ false
189)
A monopoly occurs when there is a single seller for a product or service. ⊚ true ⊚ false
190) Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition. ⊚ true ⊚ false
191)
Product differentiation is a key to success in monopolistic competition. ⊚ true ⊚ false
192)
In the United States, laws prohibit the creation of most types of monopolies. ⊚ true ⊚ false
193) One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society.
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⊚ ⊚
true false
194) The greed of some businesspeople represents a danger to the operation of a free market system. ⊚ true ⊚ false
195)
Government controls and regulations are not needed in a free market system. ⊚ true ⊚ false
196) History shows that free-market capitalism leads to a fair and equitable distribution of wealth. ⊚ true ⊚ false
197) A surplus currently exists for digital cameras. In a free-market economic system, the government must step in and buy any cameras that consumers do not buy in order to eliminate the surplus and establish equilibrium. ⊚ true ⊚ false
198) Randall owns a small bakery. During his first few months in business, he charged $4 for each specialty cupcake, averaging sales of about 200 cupcakes each week. When Randall dropped the price one month to $3 each, he sold nearly 500 each week. These results are consistent with the economic concept of demand. ⊚ true ⊚ false
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199) Leisa resides in a country where the economic system is primarily based on free-market capitalism. Leisa is likely to have the freedom to buy and sell property. ⊚ true ⊚ false
200) Jonah notices that just a few big companies produce most of the flavored teas he sees in the grocery store. He would be correct in describing the flavored tea industry as an oligopoly. ⊚ true ⊚ false
201) Magic Radiance, a popular nail polish and cosmetics company, is gaining popularity among teens and young professionals. Differentiating itself from the sea of companies that compete for the same business, it focuses on creating products using trending color palettes and unusual packaging. Magic Radiance clearly operates in an oligopolistic environment. ⊚ true ⊚ false
202) Modern Elegance is a popular fashion jewelry company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the tarnish-free finish that is applied to every earring, necklace, and ring. Due to the fact that its industry faces monopolistic competition, the company knows that it must continue to differentiate itself from the competition. ⊚ true ⊚ false
203) A small nation's economic system closely approximates pure capitalism. While the country's economy is likely to generate a great deal of wealth for some, it likely does a poor job of providing an acceptable level of income for the elderly or disabled.
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true false
204) You just read an article about a multinational entertainment company. The report shows that despite profits plummeting 35%, the company's CEO received a 15% raise. As you read on, you learn that the company's board of directors approved undeserved salary increases for top management. This is an example of how inequality and greed can infiltrate the free-market economic system. ⊚ true ⊚ false
205) Community Utility Company recently built a nuclear power plant in a southern state and started competing against People's Utility Company that has served customers in that region for 65 years. Due to deregulation, consumers now have a choice among utility companies in this area. Although Community has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall. ⊚ true ⊚ false
206) Socialists believe that the primary economic function of the government is to promote rapid economic growth. ⊚ true ⊚ false
207) In socialist economies, the government owns some, if not most, basic businesses such as public transportation systems and utilities. ⊚ true ⊚ false
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208) The top tax rate on personal income in most socialist economies tends to be lower than the top tax rate on personal income in capitalist economies. ⊚ true ⊚ false
209) The major benefit of socialism is that it creates strong incentives to work hard and take the risks associated with starting and operating a business. ⊚ true ⊚ false
210) Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system. ⊚ true ⊚ false
211) Workers in socialist countries often get longer vacations and more social benefits than workers in free-market economies. ⊚ true ⊚ false
212) Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies. ⊚ true ⊚ false
213) One drawback of socialism is that it may result in a reduction in the individual's incentive to work hard. ⊚ true ⊚ false
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214) Brain drain is the loss of the best and brightest people from their home countries to other countries. ⊚ true ⊚ false
215) High tax rates in socialist countries are a major reason these nations have experienced a brain drain. ⊚ true ⊚ false
216) Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices. ⊚ true ⊚ false
217) One of the benefits of communism is that it allows individuals a great deal of freedom to make their own economic decisions. ⊚ true ⊚ false
218) Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production. ⊚ true ⊚ false
219) The communist countries of North Korea and Cuba are suffering from severe economic problems.
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true false
220) A major distinction between capitalism and socialism concerns the distribution of income. ⊚ true ⊚ false
221) Countries that wish to avoid shortages and surpluses of goods should adopt a communist system. ⊚ true ⊚ false
222) Workers in nations who are strong proponents of communism tend to work much harder and longer hours. ⊚ true ⊚ false
223) In a small nation, the government owns several of the key businesses and provides a wide range of social services. The government strongly emphasizes income equality and eliminating the great income disparities among its citizens. These features of the economy are consistent with a socialist economic system. ⊚ true ⊚ false
224) When Luiza left her home country for the United States, she noticed several differences: the public transportation here was limited and expensive, making it difficult to get around, community college was not free, and health care was not automatically provided at no cost. Luiza's home country's economic system was more characteristic of socialism.
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225)
true false
Socialism and communism are both variations of a free-market economy. ⊚ true ⊚ false
226) In free-market economies, the government plays a major role in deciding which goods are produced and who will get them. ⊚ true ⊚ false
227) Governments that were predominantly capitalist are moving toward socialism, while some governments that were predominantly socialist are moving toward capitalism. ⊚ true ⊚ false
228)
Like most nations, the United States has a mixed economy. ⊚ true ⊚ false
229) Most countries throughout the world can be classified as either purely capitalist or purely socialist. ⊚ true ⊚ false
230) There is general agreement in the United States on the degree to which the government should be involved in the economy.
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true false
231) Subtle differences, such as the right to one's religious preference, make the command economic system known as communism more like a mixed economy than a socialistic system. ⊚ true ⊚ false
232) Some socialist nations have realized that they have not created enough wealth to keep their economies growing fast enough. ⊚ true ⊚ false
233) Most nations recognize that in a capitalistic society, private enterprise is detrimental to business growth. ⊚ true ⊚ false
234) In a mixed economy, the government's goal is to grow the economy and maintain some measure of social equality. ⊚ true ⊚ false
235) A medium-sized nation supports a free-market economy with private ownership of businesses. But lately, its government has developed policies designed to help the needy and lessen the level of income inequality. These programs are funded by relatively high taxes on businesses and workers, suggesting that this country's economy is trending toward pure capitalism. ⊚ true ⊚ false
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236) Audrey is a vocal critic of socialism. She often points out that governments in many socialistic countries have reduced taxes and cut government services. Audrey believes that this trend will ultimately result in every country adopting pure capitalistic ideals. Recent evidence shows that her views are essentially correct. ⊚ true ⊚ false
237) We rely on three indicators to measure the health of our economy: gross domestic product (GDP), the interest rate, and price indexes. ⊚ true ⊚ false
238) The total value of a country's output of final goods and services in a given year is known as the gross domestic product (GDP). ⊚ true ⊚ false
239) The measurement of total sales volume at all stages of production is called the gross domestic product (GDP). ⊚ true ⊚ false
240) Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country. ⊚ true ⊚ false
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241)
GDP figures do not include the value of illegal activities. ⊚ true ⊚ false
242) To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks. ⊚ true ⊚ false
243)
Frictional unemployment occurs because the economy is experiencing a recession. ⊚ true ⊚ false
244) Structural unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills or location of job seekers and the requirements or location of available jobs. ⊚ true ⊚ false
245) Of the four major types of unemployment, high structural unemployment levels have the most significant impact on a country's economic health. ⊚ true ⊚ false
246)
Inflation refers to a general rise in the prices of goods and services over time. ⊚ true ⊚ false
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247)
Inflation refers to the persistent rise in the purchasing power of money. ⊚ true ⊚ false
248) Disinflation refers to a situation in which prices continue to rise, but not at the rate they were rising previously. ⊚ true ⊚ false
249) Deflation means prices are declining and is an indication that economic conditions are deteriorating. ⊚ true ⊚ false
250) The consumer price index (CPI) measures what is happening to prices at the wholesale level. ⊚ true ⊚ false
251)
The CPI measures the pace of inflation or deflation. ⊚ true ⊚ false
252) The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket. ⊚ true ⊚ false
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253)
Some wages, tax brackets, interest rates, and government benefits are based on the CPI. ⊚ true ⊚ false
254)
Core inflation figures omit health care prices, but not energy prices. ⊚ true ⊚ false
255)
The producer price index measures what is happening to prices at the wholesale level. ⊚ true ⊚ false
256)
Productivity of workers in the United States is helped by technology. ⊚ true ⊚ false
257)
The higher the measurement of productivity, the higher the likely costs of production. ⊚ true ⊚ false
258) An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time. ⊚ true ⊚ false
259)
As productivity increases, the cost of producing goods and services is likely to fall.
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true false
260) In the service sector of the economy, the influx of machinery such as computers increases output per worker but does little to improve the quality of services. ⊚ true ⊚ false
261) An economy is said to be in a recession if GDP declines for two or more consecutive quarters. ⊚ true ⊚ false
262)
A depression is a severe recession that is often accompanied by deflation. ⊚ true ⊚ false
263) According to the "Reaching Beyond Our Borders" box, a country experiencing hyperinflation, such as Germany after World War I, indicates positive economic growth. ⊚ true ⊚ false
264) A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople. ⊚ true ⊚ false
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265) Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people. ⊚ true ⊚ false
266) It is understandable that productivity is rising faster in the service sector because service businesses have more and newer technologies than the manufacturing sector and fewer laborers. ⊚ true ⊚ false
267) A rising GDP, rising unemployment rate, and rising inflation rate signify a healthy economy. ⊚ true ⊚ false
268) A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and housing. ⊚ true ⊚ false
269) Tessa was laid off from her job seven months ago. At first, she looked for a new job nearly every day. However, in the last six weeks, Tessa has become depressed about not finding a job and quit looking. Based on the criteria used by the government, Tessa is a civilian whose job status is included in computing the national unemployment rate. ⊚ true ⊚ false
270) Drake believes that over the past year, the economy is experiencing rapid inflation, while Pedro says that the economy actually experienced disinflation during this period. The easiest way to settle their argument is to look at GDP figures for the past year.
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true false
271) Diamond is the office manager of a service company. Recently, she approved the request for new computers and office equipment for the entire office. If Diamond's company is like most service companies, she will probably see a big jump in the productivity figures reported for workers in her office. ⊚ true ⊚ false
272) The government of a small island nation has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that the nation is experiencing disinflation. ⊚ true ⊚ false
273) A Central American nation reports a decline in GDP for the fourth consecutive year, with no relief in sight. With unemployment at record levels and businesses failing faster than at any time in the past century, this country is likely experiencing a depression. ⊚ true ⊚ false
274) Trent decides to cancel his cable service because the price keeps increasing every month. At the same time, he received a notice from his utility company that summer rates would be increasing. His textbooks are costing twice as much as they did last year, and yesterday, gas cost 30 cents more per gallon than it did last week. He wonders how prices are rising when so many people have lost their jobs and are cutting back on expenditures. Trent is certain that this situation is an example of stagflation. ⊚ true ⊚ false
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275) Karen received a degree in marketing from a well-regarded local university and is looking for her first job. She has several leads and has heard the business market is still strong, so she is convinced that she will locate a good job in the near future. Karen's current situation is an example of structural unemployment. ⊚ true ⊚ false
276) Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation. ⊚ true ⊚ false
277) Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending. ⊚ true ⊚ false
278)
The national deficit is the difference between our nation's exports and its imports. ⊚ true ⊚ false
279)
The size of the national debt increases when the federal government runs a deficit. ⊚ true ⊚ false
280)
The U.S. national debt equals the sum of government deficits over time.
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⊚ ⊚
true false
281)
The Federal Reserve Bank is responsible for controlling the money supply. ⊚ true ⊚ false
282)
Monetary policy is directly under the control of the U.S. Department of the Treasury. ⊚ true ⊚ false
283) One of the major ways the Fed influences economic conditions is through its control of interest rates. ⊚ true ⊚ false
284) High tax rates that put money into the government's funds tend to slow spending, and ultimately slow the economy. ⊚ true ⊚ false
285) If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes. ⊚ true ⊚ false
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286) Monetary policy is implemented to ease the up and down swings of business cycles, while fiscal policy is implemented to create swings when the cycle is stalled in an economic boom. ⊚ true ⊚ false
287)
If the national debt is $20 trillion, the national deficit will be considerably higher. ⊚ true ⊚ false
288)
Government spending on defense decreases the national deficit. ⊚ true ⊚ false
289) To stimulate the economy, the Fed is likely to lower interest rates in order to encourage individuals and businesses to spend money. ⊚ true ⊚ false
290) The best way to avoid national budget deficits is to increase our exports and decrease our imports. ⊚ true ⊚ false
291) In order to restrict spending by businesses and households, the Fed would take measures designed to lower interest rates. ⊚ true ⊚ false
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292) FDR's New Deal legislation funded an extensive package of public works and infrastructure programs while providing jobs for millions of Americans. This type of economic stimulation is an example of monetary policy in action. ⊚ true ⊚ false
293) A large state's senator recently made a speech condemning the continuous deficits in the federal budget. She now proposes an increase in tax rates to raise more revenue for the government and thus gradually reduce the size of the national debt over a period of several years. This proposal is a common type of monetary policy. ⊚ true ⊚ false
294) A prominent economics professor recently urged government policy makers to cut taxes and increase government spending in order to pull the economy out of a downturn. These policy measures are examples of fiscal policy. ⊚ true ⊚ false
295) Javier is purchasing his first home in Jacksonville, Florida. He is seeking prequalification on a home loan. However, the unemployment rate for Florida is 10.2% and GDP is declining. Chances are good that the Fed will raise interest rates in order to loosen the supply of money, resulting in a more expensive loan for Javier. ⊚ true ⊚ false
296) The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is likely to pursue policies to restrict the supply of money and raise interest rates.
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true false
297) Brant needs a new car and he is planning to borrow the money from a nearby bank. He read online that the Federal Reserve is likely to implement policies in the next few weeks that are designed to stimulate the economy. If he waits until after the Fed implements its new policies, Brant will probably get a lower interest rate on his car loan. ⊚ true ⊚ false
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Answer Key Test name: chapter 2 6) B 7) A 8) D 9) C 10) B 11) D 12) B 13) C 14) B 15) A 16) A 17) C 18) A 19) B 20) A 21) B 22) B 23) D 24) C 25) D 26) D 27) C 28) B 29) C 30) C 31) B
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32) A 33) A 34) D 35) C 36) A 37) C 38) C 39) A 40) B 41) C 42) A 43) D 44) D 45) B 46) A 47) C 48) B 49) D 50) C 51) C 52) A 53) D 54) C 55) A 56) B 57) A 58) B 59) D 60) A 61) C
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62) B 63) B 64) D 65) A 66) A 67) B 68) C 69) C 70) D 71) C 72) B 73) A 74) D 75) B 76) D 77) C 78) D 79) B 80) C 81) B 82) D 83) A 84) A 85) B 86) A 87) C 88) A 89) B 90) D 91) D
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92) B 93) D 94) D 95) D 96) C 97) A 98) A 99) B 100) C 101) D 102) A 103) D 104) C 105) B 106) A 107) C 108) A 109) A 110) C 111) B 112) C 113) D 114) C 115) D 116) B 117) B 118) C 119) B 120) C 121) A
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122) A 123) B 124) A 125) C 126) C 127) D 128) A 129) B 130) A 131) C 132) A 133) D 134) A 135) B 136) D 137) B 138) C 139) D 140) C 141) C 142) D 143) Section Break 143.1) B 143.2) B 143.3) A 143.4) D 143.5) A 143.6) D 144) TRUE 145) TRUE
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146) FALSE 147) TRUE 148) FALSE 149) TRUE 150) FALSE 151) TRUE 152) FALSE 153) TRUE 154) FALSE 155) TRUE 156) TRUE 157) TRUE 158) TRUE 159) FALSE 160) TRUE 161) TRUE 162) FALSE 163) TRUE 164) FALSE 165) FALSE 166) TRUE 167) FALSE 168) TRUE 169) FALSE 170) FALSE 171) TRUE 172) TRUE 173) TRUE 174) FALSE 175) FALSE
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176) FALSE 177) TRUE 178) TRUE 179) TRUE 180) TRUE 181) TRUE 182) FALSE 183) FALSE 184) FALSE 185) TRUE 186) FALSE 187) FALSE 188) FALSE 189) TRUE 190) FALSE 191) TRUE 192) TRUE 193) FALSE 194) TRUE 195) FALSE 196) FALSE 197) FALSE 198) TRUE 199) TRUE 200) TRUE 201) FALSE 202) TRUE 203) TRUE 204) TRUE 205) TRUE
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206) FALSE 207) TRUE 208) FALSE 209) FALSE 210) TRUE 211) TRUE 212) FALSE 213) TRUE 214) TRUE 215) TRUE 216) FALSE 217) FALSE 218) TRUE 219) TRUE 220) TRUE 221) FALSE 222) FALSE 223) TRUE 224) TRUE 225) FALSE 226) FALSE 227) TRUE 228) TRUE 229) FALSE 230) FALSE 231) FALSE 232) TRUE 233) FALSE 234) TRUE 235) FALSE
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236) FALSE 237) FALSE 238) TRUE 239) FALSE 240) FALSE 241) TRUE 242) TRUE 243) FALSE 244) TRUE 245) FALSE 246) TRUE 247) FALSE 248) TRUE 249) TRUE 250) FALSE 251) TRUE 252) FALSE 253) TRUE 254) FALSE 255) TRUE 256) TRUE 257) FALSE 258) TRUE 259) TRUE 260) FALSE 261) TRUE 262) TRUE 263) FALSE 264) FALSE 265) FALSE
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266) FALSE 267) FALSE 268) FALSE 269) FALSE 270) FALSE 271) FALSE 272) TRUE 273) TRUE 274) TRUE 275) FALSE 276) FALSE 277) TRUE 278) FALSE 279) TRUE 280) TRUE 281) TRUE 282) FALSE 283) TRUE 284) TRUE 285) FALSE 286) FALSE 287) FALSE 288) FALSE 289) TRUE 290) FALSE 291) FALSE 292) FALSE 293) FALSE 294) TRUE 295) FALSE
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296) TRUE 297) TRUE Student name:__________ 1) Compare and contrast comparative and absolute advantage in global markets. Provide examples.
2)
Describe and provide examples of four different strategies for reaching global markets.
3) Explain and provide at least one example of how sociocultural differences can create trade difficulties in world markets.
4) Explain and provide at least one example of how legal and regulatory forces impede global trade.
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5)
Define offshore outsourcing and explain its pros and cons.
6)
__________ is the selling of products to another country. A) In-trading B) Exporting C) Importing D) Dumping
7)
__________ is buying products from another country. A) Importing B) Outsourcing C) Retailing D) Exporting
8)
The largest importer in the global market today is
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A) Japan. B) Russia. C) Germany. D) the United States.
9)
In volume of exports, the two leading nations are A) the United States and China. B) the United States and Canada. C) China and Germany. D) China and France.
10)
The global market consists of __________ potential customers. A) over 7 billion B) over 300 million C) about 100 million D) about 30 billion
11)
Which continent is home to the largest percentage of the world's population? A) Africa B) Europe C) North America D) Asia
12) A nation has a __________ in the production of a good or service if it can produce that good or service more effectively or efficiently than it can produce other goods.
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A) supreme advantage B) primary efficiency C) qualified advantage D) comparative advantage
13) __________ occurs when a country has a monopoly on producing a product or is able to produce it at a cost well below that of all other countries. A) Comparative advantage B) Absolute advantage C) Complete advantage D) Dumping advantage
14)
The theory of comparative advantage exists because
A) there are too many products and services to choose from today. B) customers are always comparing the quality of service from companies in the same industry. C) no nation can produce all the products its people want and need. D) free-trade agreements became the trend during the past 15 years.
15)
One advantage of free trade is A) jobs are shifted to low-wage global markets. B) service jobs are moved overseas. C) advanced production operations are built in low-wage countries. D) innovation for new products occurs which keeps firms competitively challenged.
16)
The concept of free trade means
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A) buyers and sellers contract with each other and offer some goods at no cost. B) goods and services can be traded freely across borders without political and/or economic barriers. C) there is no exchange of currency for these products. D) a bartering process without currency exchange is used to purchase goods.
17)
Why does it make sense to trade with other nations?
A) After producing all the product and service its people want and need, a nation can sell the excess products to the world. B) Some nations have lots of natural resources and technological know-how. They have an ethical obligation to offer the rest to other nations. C) Other nations need foreign currency. D) A nation will produce what it can produce most efficiently and effectively and buy from other nations what they can produce most efficiently and effectively.
18)
Which statement is the best description of comparative advantage?
A) The best way for a nation to ensure full employment is to be completely selfsufficient and not at all reliant on trading with other nations. B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can. C) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships. D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.
19) The theory of __________ states that a nation should produce and sell goods to other countries that it produces most efficiently, and buy goods from other nations that they produce more efficiently.
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A) comparative advantage B) absolute advantage C) mercantilism D) bilateral advantage
20)
Free trade between nations generally results in A) industrialized nations gaining at the expense of developing nations. B) an increase of jobs in developed nations. C) mutually beneficial exchange relationships. D) higher prices for imported goods.
21)
A free-trade agreement is unlikely to result in A) pay increases for domestic workers. B) higher-priced imports. C) decreased innovation. D) productivity declines.
22) A small nation is extremely efficient in the mining of tin. However, its climate and terrain make it difficult to produce corn. According to the theory of comparative advantage, this nation should A) produce both tin and corn in order to remain self-sufficient. B) watch the global market to see which product is bringing the highest price. C) import the resources needed to produce corn. D) concentrate its production on tin and buy corn from an efficient producer.
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23) One poor country produces nearly 97% of the quinoa consumed around the world, and most of it is sold to wealthy nations. Although there are other areas where the seed will grow, the majority of the quinoa sold is imported from this area. This country has a(n) __________ in the production of quinoa. A) absolute advantage B) comprehensive advantage C) comparative advantage D) tertiary advantage
24) Simon, a citizen of Indiana, says that his laptop was made in the Philippines. Simon purchased a(n) A) imported item. B) exported item. C) protected good. D) generic good.
25) A small firm specializing in appliances designed for RVs has a manufacturing plant in Ohio, although it ships its products to dealers through out the United States, Canada, and Mexico. This firm participates in the global market through A) importing. B) dumping. C) exporting. D) balancing trade.
26) A rare variety of the ginkgo tree seems to grow only in Thailand. Researchers have discovered its seeds have potential healing properties for some forms of cancer. Which statement describes this situation?
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A) Thailand has a near absolute advantage in this plant. B) Thailand has a comparative advantage in this plant. C) Thailand's agricultural industry is considered perfect competition. D) Thailand's agricultural industry participates in monopolistic competition.
27) Many toys sold in the United States are imported from Taiwan because the Taiwanese can produce these products more efficiently than U.S. companies. This is an example of A) bilateral advantage. B) comparative advantage. C) absolute advantage. D) unilateral advantage.
28) Climate and terrain in several South American countries are conducive to growing coffee beans efficiently. While other countries have the ability to grow the bean, they are not as efficient and effective because of short seasons and climate concerns. This fact would lead you to believe that these South American countries have a(n) __________ advantage in the production of coffee. A) comparative B) absolute C) unprotected D) progressive
29) The only deposits of a rare and sought-after mineral are found in Ukraine. Since no other nation has similar deposits of this mineral, Ukraine has a(n) A) protected advantage. B) diversified benefit. C) absolute advantage. D) relative internal benefit.
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30) A large U.S.-based mechanical engineering firm wants to enter the global market. Upon careful analysis, they will find that global trade A) opportunities are diminishing. B) is dominated by emerging, developing countries. C) is big business today and is expected to be more important in the future. D) is only profitable for small and mid-sized companies.
31) Shortly after graduating college, Alec took his place in his family's company in Miami. Alec's father and uncle started a company that buys bauxite, copper, and other minerals from Chile, and brings them into the United States. Alec's job will be to broker trades with mines in Chile. Alecis a(n) A) exporter. B) quota manager. C) importer. D) domestic trader.
32) Fred Bergsten of the Institute for International Economics estimates that every $1 billion of U.S. exports A) replaces 250 service-sector jobs with 25 manufacturing jobs in the United States. B) causes lost revenues for the U.S. federal government. C) results in reduced profits for U.S. businesses. D) generates over 7,000 jobs in the United States.
33)
A favorable balance of trade occurs when the value of
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A) imports equals the value of exports. B) the cash inflows equals the value of the cash outflows. C) imports is less than the value of exports. D) the dollar is greater than the value of the euro.
34)
An unfavorable balance of trade occurs when the value of A) imports equals the value of exports. B) imports exceeds the value of exports. C) cash inflows is equal to the value of cash outflows. D) exports exceeds the value of imports.
35) The __________ is the total value of a nation's exports compared to its imports measured over a specific period of time. A) balance of payments B) balance of trade surplus C) balance of trade deficit D) balance of trade
36) The __________ is the difference between money flowing into a country from exports, and money leaving the country for imports, plus money flows coming from other factors such as tourism, foreign aid, military expenditures, and foreign investment. A) balance of payments B) balance of trade surplus C) balance of cash flows D) balance of trade
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37)
What is included when calculating a country's balance of payments? A) foreign aid B) domestic unemployment C) domestic inflation rates D) foreign inflation rates
38)
What is considered when calculating a country's balance of payments? A) military expenditures B) state unemployment C) domestic inflation rates D) foreign inflation rates
39)
Since 1975, the United States has had a(n) A) export surplus. B) import deficit. C) trade surplus. D) trade deficit.
40) __________ is the practice of selling a product in foreign countries for a lower price than the good is sold in the producing country. A) Deflating B) Countertrading C) Inflating D) Dumping
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41) When Anheuser-Busch InBev sells Budweiser beer made in St. Louis, MO, to Germany, the sales of its product would be classified as a A) countertrade arrangement. B) U.S. export. C) U.S. import. D) foreign aid shipment.
42)
Compared to China, Germany, and Japan, the U.S. exports A) almost none of its products. B) a much lower percentage of its products. C) a much higher percentage of its products. D) mostly its domestically undesirable products.
43)
An important principle for firms desiring to export is A) sell to countries with high standards of living. B) keep in mind that American methods are probably always best. C) find a need in the global market and fill it. D) if your product sells well in theUnited States it will sell well globally.
44)
As a business strategy, the strategy behind dumping is to A) gain a foothold in a new market. B) get rid of faulty products. C) avoid trade protectionist laws. D) achieve eligibility for foreign aid.
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45) Reviewing the recent experience of the United States in global markets reveals that the United States has A) a merchandise trade surplus with the rest of the world. B) a large trade deficit with China. C) avoided becoming a debtor nation. D) worked to attract underpriced foreign products.
46) According to the "Connecting through Social Media" box, YouTuber Zoe Sugg reaches an audience of nearly 12 million people who enjoy going online to watch her demonstrate candles, lotions, and accessories. Many viewers then purchase these items. For consumers, Zoe is an example of a(n) A) marketing executive. B) app developer. C) social media influencer. D) traditional advertiser.
47) The value of goods imported into Spain exceeds the value of Spanish exports. This indicates that Spain A) has an exchange rate decrease. B) utilizes high tariffs. C) has a budget deficit. D) has a trade deficit.
48) Current trade data shows that one wealthy country in Europe exports far more to other nations than it imports. This country has
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A) an unfavorable balance of trade. B) a trade surplus. C) a trade deficit. D) a low balance of trade.
49) Japanese automobile producers sold more of their production overseas than they sold in Japan. Their business strategy emphasizes A) importing. B) licensing. C) dumping. D) exporting.
50) Brooke's Boutique sells clothing from around the world in the United States. Brooke regularly travels overseas to find the best and most unusual shirts, dresses, and pants that foreign producers have to offer. Brooke is a(n) A) importer. B) licensee. C) dumper. D) exporter.
51) Last year, a small nation imported goods totaling $300 million and exported products totaling $86 million. This nation experienced a(n) A) unfavorable balance of trade. B) favorable balance of trade. C) trade surplus. D) benefit from membership in a free-trade zone.
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52) Last year, a Central American nation reported that it had a favorable balance of trade even though it imported $9 billion worth of goods. This indicates that A) it exported $9 billion worth of goods. B) it exported more than $9 billion worth of goods. C) it overpriced the value of its exports. D) it exported less than $9 billion worth of goods.
53) A nation recently reported that its imports for the previous year were $7 billion greater than its exports. During the same period, the country reported a favorable balance of payments. What might this information indicate? A) The country has misstated information in its report. It must have had a balance of payments deficit since more money flowed out for imports than flowed into the country for its exports. B) The country's gold and other precious metal reserves increased in value. C) Money inflows from tourism, foreign aid, foreign investment, and other sources more than offset the nation's trade deficit. D) This country devalued their currency to obtain a more favorable exchange rate.
54) The president of Reliable Tires Inc. just testified before Congress. He urged them to limit the flow of imported automotive tires into the country, as these imports were priced lower than foreign producers were charging for them in their own countries. He believes foreign producers are A) dumping. B) increasing the trade deficit. C) promoting free trade. D) licensing.
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55) What pricing strategy are foreign firms required by law to use according to U.S. antidumping policies? A) Prices must include 10% overhead costs and an 8% profit margin. B) Prices must meet or exceed those for similar U.S. products. C) Prices must fall below those charged in the producing nation by 8%. D) Prices must include a profit margin of at least 10%.
56) Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called A) a joint venture. B) contract manufacturing. C) licensing. D) outsourcing.
57) The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called A) a tariff. B) a royalty. C) a licensee. D) an outsource agreement.
58)
A major advantage of licensing is
A) these arrangements almost always lead to a joint venture. B) the bulk of the revenues gained by the licensee come back to the licensor. C) your company name does not need to be associated with the product in a foreign country. D) very little cost to the licensor.
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59)
A disadvantage of licensing is
A) it is very costly for the licensor. B) the licensee can decide to end the contract at a moment's notice. C) your company's image is never permitted to be associated with the product, even though you are the developer. D) the potential loss of technology or trade secrets.
60) The federal government created __________ to help small and medium-sized businesses get involved in exporting. A) the World Trade Organization B) Federal Export Loan Banks C) Export Assistance Centers D) the Federal Trade Promotion Commission
61) __________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets. A) Export-trading companies B) Licensees C) Strategic alliances D) Contract manufacturers
62) __________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory in a specified manner.
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A) Franchising B) Contract manufacturing C) Import trading D) A strategic alliance
63) When a company's strategy is __________, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product. A) franchising B) contract manufacturing C) import sourcing D) export trading
64) A __________ is a partnership in which two or more companies (often from different countries) join together and share the risk and costs in order to undertake a major project. A) multinational cooperative B) joint venture C) franchisee transfer D) recruit affiliation
65) A __________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages, without sharing the cost of risk. A) multinational cooperative B) shared venture C) global franchise D) strategic alliance
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66)
An advantage of forming a joint venture is A) no shared costs or risk. B) a perpetual arrangement. C) shared marketing and management expertise. D) guaranteed profits for all participants.
67) A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service, is a A) licensor. B) joint venture. C) foreign subsidiary. D) contract manufacturer.
68)
When foreign firms build production facilities in the United States, they are engaging in A) exporting. B) foreign direct investment. C) importing. D) countertrading.
69) A risk unique to firms with direct investment in a foreign country is the potential takeover of the firm's assets by the government of that country. This takeover is called a(n) A) hostile takeover. B) embargo. C) appropriation. D) expropriation.
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70) A(n) __________ is a firm that has made sizable investments and has a physical presence in several foreign countries as a manufacturer and marketer of products and services. A) franchiser B) multinational corporation C) host company D) import trading company
71) A fast-growing form of foreign direct investment is __________, which are governmentcontrolled investments in foreign companies. A) sovereign wealth funds B) multinational wealth funds C) government mutual funds D) contract manufacturing
72) A specialized organization that assists businesses in creating relationships with foreign customers and suppliers is known as a(n) A) export-trading company. B) international brokerage house. C) private licensor. D) global trade bank.
73)
What is a benefit of contracting with export-trading companies?
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A) They are experts in establishing trading partners abroad, and negotiating all the details in retaining customers. B) They are experts in staying out of the financial transactions of establishing new markets. C) They will assume the risk if your product does not sell to foreign customers. D) They keep you legal because they serve as the franchisor and make certain that your products meet ISO requirements.
74)
One of the purposes of Export Assistance Centers is to
A) help multinational corporations reach agreements with foreign governments. B) provide subsidies to domestic firms hurt by foreign dumping. C) provide trade-finance support for small and medium-sized firms involved in direct exporting. D) encourage domestic firms to enter into joint ventures.
75)
Licensing is a popular strategy because A) it boosts domestic market revenues. B) the licensee has incentive to work hard and succeed because they have borne the
cost. C) licensees spend little or no money to produce and market their products. D) there are seldom any long-term contractual requirements.
76) Using contract manufacturing as a strategy to reach global markets gives firms the advantage of A) expert and experienced laborers. B) reduced financial risks. C) guaranteed sales. D) currency stability.
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77) Companies may have several reasons for creating joint ventures. Which statement is one reason why firms may decide to form a joint venture? A) They may wish to contract manufacture with each other. B) They will save time to market if they pool their technological know-how. C) These arrangements are always less risky than strategic alliances. D) These arrangements rely solely on local marketing and management expertise.
78)
For a firm to be considered a multinational corporation, which condition must be true? A) It must have manufacturing facilities and a physical presence in several countries. B) Its marketing arm must be based at the company's world corporate headquarters. C) Stock ownership must be domestic. D) All transactions must be financed through the International Monetary Fund.
79) A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs). Why do these investments by governments with surplus cash flows worry trade experts? A) SWFs invest in high-risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies. B) SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses. C) Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management. D) Some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine international security.
80) In the box, "A World of Options Under the Arches," the textbook discusses one reason McDonald's has become a global powerhouse. Which statement best describes what led to McDonald's success?
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A) McDonald's was careful to include regional tastes along with its traditional burgers and fries. B) McDonald's kept to what it did best and only served its classic menu overseas. C) McDonald's licensed all its overseas restaurants. D) McDonald's participates in contract manufacturing.
81)
Firms are considered multinationals when they A) sell any of their products outside their home country. B) have a physical presence or manufacturing capacity in multiple countries. C) positively affect the U.S. balance of trade. D) export 100 percent of their products.
82) When entering a foreign market, Friendly Farmer Brewery entered into an agreement with a local firm to brew and market Friendly Farmer's beer. This is an example of A) licensing. B) franchising. C) foreign direct investment. D) foreign subsidiaries.
83) The Peak Pack Company wants to begin exporting its rock-climbing products. The company needs advice about how to get started, as well as trade-finance support. The federal government has established __________ to help companies like Peak Pack. A) the World Trade Commission B) Export Assistance Centers C) export-trading companies D) Federal Reserve Banks
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84) The quinoa seed is in high demand in wealthy countries but is not farmed in those countries. Approximately 97% of all quinoa production comes from small farmers in one region who farm at high elevations. For the two countries in this area, the seed is now considered an important A) foreign direct investment. B) licensed product. C) export. D) import.
85) PepsiCo entered into a long-term contract with a South African beverage company. The contract calls for the South African firm to produce and market Pepsi products in the country. PepsiCo will receive royalties on each case of sodas sold. This is an example of A) licensing. B) a joint venture. C) a foreign subsidiary. D) foreign direct investment.
86) A firm in France and another based in Japan recently produced a new electric car with rechargeable batteries that can be driven at high speeds for long distances. They shared the investment, each contributing important technological expertise to the effort. These firms entered into a(n) __________ to build this car. A) joint venture B) licensing agreement C) industrial franchisingagreement D) multinational limited partnership
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87) NextGen Industries __________ its products in foreign countries, where labor is less expensive and production sites are owned by other companies. This strategy allows NextGen Industries to experiment in new markets without incurring the large start-up costs involved with building its own production facilities. A) contract franchises B) pays governments to market C) globally licenses D) contract manufactures
88) If a Swiss chocolate firm purchases an American ice cream manufacturer, the American ice cream manufacturer becomes a A) global franchise. B) global joint venture. C) foreign subsidiary. D) contract manufacturer.
89)
Which statement is the most accurate observation regarding multinational corporations?
A) Rather than manage manufacturing and marketing facilities overseas, most multinational corporations attempt to enter global markets by exporting domestically produced goods. B) Most multinational corporations are small- to medium-sized firms. C) Because of political and economic concerns, most multinational corporations choose to ignore investment opportunities outside North America. D) Only those firms with a physical presence in different nations qualify as multinational corporations.
90) Walmart International has almost 6,000 retail units, operating in 27 countries. It also owns other supermarkets, department stores, specialty retailers, and shopping centers around the globe. Walmart can be identified as
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A) a sovereign wealth fund. B) a multinational corporation. C) a foreign subsidiary. D) an expropriated organization.
91) Essence Energy refines and markets its energy products in different nations around the world. In addition, Essence Energy's stockholders and managers come from many different nations. If some of the nations where it operates decided to take over the assets of the company, this act would constitute A) patent infringement. B) expropriation. C) illegal activity. D) hostile takeover.
92) Which term describes the set of values, beliefs, rules, language, and institutions held by a specific group of people? A) culture B) ethnocentricity C) institutional society D) customs
93) __________ describes an attitude held by some American businesspeople that American culture is superior to all others. A) Primary culture B) Ethnocentricity C) Cultural institutionalism D) Social myopia
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94)
Ethnocentricity means
A) "when in Rome, do as the Romans!" B) you believe your culture is superior to others. C) cultural awareness. D) a trend toward accepting other cultures. and trying various foods and religions to see if they fit your lifestyle.
95) Which sociocultural force can have the most significant impact on global business operations? A) religion B) universal sales standards C) single-phase marketing D) natural resources
96) What represents the value of one nation's currency relative to the currencies of another country? A) euro rate B) inflation rate C) exchange rate D) standard of living
97) Global financial markets operate under a system of __________, where the supply and demand for various currencies will determine their value at any moment in time.
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A) living rates B) foreign good rates C) floating exchange rates D) borrowing rates
98) __________ is the exchange of merchandise or services for other merchandise or services without the exchange of money. A) Exporting B) Bartering C) Importing D) Dumping
99)
If a nation's currency is weak, people may have to fall back on A) exporting. B) bartering. C) importing. D) factoring.
100)
__________ is lowering the value of a nation's currency relative to other currencies. A) Revaluation B) Deflation C) Devaluation D) Regulation
101) __________ is a complex form of bartering in which several countries may be involved, each trading products and services for the products and services of another country.
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A) Venture bartering B) Global monetarism C) Countertrading D) Foreign direct investment
102) by
Under the floating exchange rate system, the value of a country's currency is determined
A) the monetary authorities of that country. B) the Organization for Economic Cooperation and Development. C) the currency's supply and demand in the global market. D) countertrading.
103) The legislation that prohibits U.S. businesses from making "questionable" or "dubious" payments to foreign officials to secure business contracts is the A) Foreign Corrupt Practices Act. B) Foreign Antitrust Act. C) Multinational Collusion law. D) Global Good Conduct law.
104)
Which statement describes laws and regulations in global markets?
A) There is not a central system of law in existence. B) The World Trade Organization reigns supreme and dictates global law for all markets. C) Most trading partners will default to the laws that govern the seller's home country. D) With the exception of labor relations, most laws are pretty standard across global markets.
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105) To understand legal and regulatory conditions and be successful in global markets, it is most useful to contact A) the local Better Business Bureau. B) local businesspeople in the host countries. C) the Regional Economic Development Trading Desk (REDTD). D) the Organization for Economic Cooperation and Development (OECD).
106) People from other nations sometimes comment on the ethnocentric attitudes of U.S. businesspeople. This indicates that American businesspeople A) are respectful of local cultures and customs. B) quickly accept the suggestions and ideas of others. C) believe that American culture is superior to all others. D) celebrate the many ethnic groups that make up American life.
107) A sociological challenge that must be overcome in order to be successful in the global market is A) a lack of cultural understanding. B) an overly anxious desire to please at all cost. C) inequality of global natural resources. D) wealth management.
108) __________ differences such as insufficient electrical power and transportation systems can present special problems for U.S. firms when attempting to enter global markets.
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A) Physical and environmental B) Legal and regulatory C) Economic D) Governmental
109) In some countries it is customary to pay government officials to secure necessary business contracts and permits. American businesses must follow U.S. law and cannot make these payments according to the A) Foreign Antitrust Act. B) Foreign Corrupt Practices Act. C) Multinational Collusion Law. D) U.S. Consumer Product Safety Commission.
110) Under a system of floating exchange rates, changes in the value of the U.S. dollar relative to other currencies are the result of A) negotiated rate adjustments between the U.S. government and the World Trade Organization. B) decisions made by the Federal Reserve Board of Governors in order to implement monetary policy. C) fluctuations in the world price of gold. D) changes in the supply of and/or demand for dollars in the global currency market.
111)
If global trade experts predict that the value of the dollar will soon fall, it will result in
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A) both the prices of imported goods rising and prices of U.S. goods sold overseas rising. B) prices of imported goods rising, but prices of U.S. goods sold overseas falling. C) both the prices of imported goods falling and prices of U.S. goods sold overseas falling. D) prices of imported goods falling, but prices of U.S. goods sold overseas rising.
112) Denice feels the U.S. culture defines the model for the rest of the world, and that the "American way" of doing things is the best. Denice is guilty of A) ethnic plagiarism. B) ethnocentricity. C) culture shock. D) multiculturalism.
113) In order to level the playing field in trade between the United Statesand China, U.S. policymakers have called upon China's government to allow the yuan to float freely, as other world currencies. Through government regulation, China maintains an undervalued currency, which results in A) more buying power for Chinese consumers who want to purchase U.S. goods and goods from other countries. B) maintaining robust Chinese exports and a favorable balance of trade for China. C) developing better relations with industrialized countries who want to increase the value of their exports. D) stability and strength of the Chinese yuan against the U.S. dollar and the euro.
114) Workers in Country A expect managers to forcefully tell employees what to do, how to do it, and when. On the other hand, workers in Country B prefer to take part in workplace decision making. This difference between workers represents a(n) __________ management challenge for firms trading in the global market.
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A) geo-political B) economic C) sociocultural D) regulatory
115) A company in Mexico recently agreed to trade coal to an American importer in return for American-made cars. This arrangement is an example of A) a joint venture. B) a nontariff trade. C) arbitrage. D) barter.
116) In order to manufacture their high-end mountain bikes, Pedal On Inc., needs a special oil it can only import from a company in India. In turn, that company can only produce the oil with ingredients it obtains from the exclusive producer in Thailand. The company in Thailand agrees to provide the ingredients to the company in India in exchange for a quantity of mountain bikes from Pedal On. This beneficial exchange is a form of A) positive contracting. B) contract manufacturing. C) third-party purchasing. D) countertrading.
117) A powerful foreign government official approaches your company and requests a large sum of money. In return for this bribe, he promises your company will receive preferential treatment in all future government contracts. You quickly refuse his request, explaining that the __________ Act of the United States prohibits you from making such payments.
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A) Federal Trade Commission B) Sherman Antitrust C) Foreign Corrupt Practices D) Celler-Kefauver
118) U.S. recording studios have found that artists' music is illegally copied and sold overseas within 24 hours of the music selling in the U.S. market. As a student who is now aware of the challenges businesses face in global trade, which statement do you think is an accurate representation of this situation? A) The copying and selling of the artist's original music is illegal and enforceable by international copyright law. B) The copying and selling of the artist's music is legal due to the fact that are no online copyright laws. C) United States copyright laws do not necessarily apply globally. D) Copyright laws only protect the artist, but not the recording studios.
119) An American company recently won a huge contract with a company in Kosovo, by gifting its government officials with American cars and an assurance of monetary gifts. Clearly, this procedure A) violates the Foreign Corrupt Practices Act. B) violates the Fair and Balanced Competitive Practices Act. C) defines the common business practices of the foreign nation and should be respected. D) defines the terms of the business contract, and as long as both parties sign, the agreement is binding.
120) When studying abroad last year, Bradley found that his U.S. dollars did not stretch as far as he had expected. Each time he exchanged his dollars for euros, he had to give up more dollars in exchange for fewer euros. The exchange rate indicates
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A) the dollar has gained strength against the euro. B) the euro is weak against the dollar. C) the euro has gained strength against the dollar. D) the demand for dollars is stronger than the demand for euros.
121) Northwest PowerWasher Company recently entered into an agreement with a large Japanese retailer to distribute its power washers in Japan. What scenario would be the most favorable for Northwest PowerWasher Company? A) The yen is gaining strength compared to the U.S. dollar, making it cheaper for Japanese customers to buy American products. B) The yen is down against the U.S. dollar, making it cheaper for Japanese customers to buy American products. C) There are high tariffs on all mechanical products imported into Japan. D) There are several companies already operating in Japan that offer a similar product.
122) When Loreen was planning a Caribbean cruise, she decides to purchase all her souvenirs in the Bahamas because the exchange rate would be to her benefit. This means A) the currency in the U.S. is weak against the Bahamian dollar. B) the currency in the U.S. will be about equal to the Bahamian currency; otherwise it would not be a good exchange. C) the currency in the U.S. is devalued. D) the currency in the U.S. has strength against the Bahamian currency.
123) Wearable Technology, an American retail store, buys most of its inventory from Asian countries. Wearable Technology would benefit if the value of the dollar __________ relative to the currencies of the countries from which it imports.
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A) rose B) fell C) remained constant D) floated unpredictably
124) In his effort to avoid domestic competition, the owner of Johnson Plumbing Fixtures sets his sights on the vast market of a developing country. Much to his surprise, most of the country's citizens do not yet have indoor plumbing and are accustomed to government-run communal baths. This company's global marketing effort might be hampered by A) legal and regulatory constraints. B) cultural constraints. C) physical and environmental constraints. D) the floating exchange rate.
125) __________ is the use of government regulations to limit the import of goods and services. A) Trade protectionism B) Fiscal policy C) Countertrade policy D) Monetary policy
126) __________ was a seventeenth- and eighteenth-century belief that a nation should try to sell more goods to other nations than it buys from them. A) Capitalism B) Comparative advantage C) Mercantilism D) Free trade
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127)
The two basic types of tariffs are A) goods and services. B) general and limited. C) comparative and absolute. D) revenue and protective.
128) A __________ tariff is designed to raise the price of imported products so that domestic goods are more competitively priced. A) protective B) restrictive C) progressive D) revenue
129)
__________ tariffs are designed to raise money for the government. A) Regulatory B) Revenue C) Productive D) Protective
130) In an effort to protect domestic jobs, some countries will place a limit on the number of certain types of products that can be imported. These limits are called A) revenue tariffs. B) protective tariffs. C) import quotas. D) devaluations.
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131) A(n) __________ refers to a complete ban on importing or exporting of products from a specific country. A) absolute tariff B) protective tariff C) quota D) embargo
132) Some governments initiate restrictive standards that detail exactly how a product must be sold in a country. Trade experts call these restrictions A) monetary tariffs. B) countertrade policies. C) nontariff barriers. D) export constraint policies.
133)
The purpose of the General Agreement on Tariffs and Trade (GATT) is to A) facilitate global trade. B) create common market arrangements in specific geographical regions. C) negotiate an end to civil wars. D) establish a set of international property right laws.
134)
The common market known as COMESCA is A) a subset of the Mercosur trading bloc. B) a subset of the European Union. C) composed of Southern African and Eastern African nations. D) composed of Ecuador, Surinam, Chile, and Argentina.
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135) The European Union created a single monetary unit to replace the national currencies of member nations. This common currency is known as the A) e-dollar. B) pound. C) lira. D) euro.
136)
The free-trade area created by NAFTA involved which three countries? A) Canada, Panama, and the United States B) Mexico, Panama, and the United States C) Canada, Nicaragua, and Mexico D) Canada, Mexico, and the United States
137) The common market arrangement that groups Brazil, Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Peru, and Suriname is called A) the South American Trade Organization. B) ASEAN. C) the Latin Free Trade Zone. D) Mercosur.
138)
In number of member nations, the largest free-trade area in the world is A) the European Union. B) the African Continental Free Trade Area. C) Mercosur. D) the Association of Southeast Asian Nations Economic Community.
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139)
Another name for a common market is A) political alliance. B) trading bloc. C) continental community. D) economic cooperative.
140) Traders in the seventeenth and eighteenth century were encouraged to focus on selling their nation's goods in the global market to create a favorable balance of trade. Nations attempted to sell more goods to other nations than they bought from other nations. This approach to global trading is called A) ethnocentrism. B) mercantilism. C) protectionism. D) isolationism.
141)
The motivation behind trade protectionism is A) to limit accelerated growth of GDP that would cause inflation to escalate. B) to facilitate the belief that it will keep one's nation disease free. C) to increase the positive economic consequences of one's trade position. D) to reduce tariffs on desirable goods.
142) The U.S. embargo against all trade with Venezuela, Iran, Syria, and North Korea most likely is the result of
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A) environmental limitations on trade. B) lack of business opportunities. C) currency fluctuations. D) political disagreements.
143)
The benefits of protective tariffs are
A) they increase the revenues of the government that has implemented them. B) they decrease the cost of imported products to the consumer (end user). C) they help develop friendlier trade relations with loyal trading partners. Both parties are protected. D) they protect domestic jobs by encouraging cost-sensitive consumers to purchase domestic products.
144) A major concern voiced by U.S. critics of the North American Free Trade Agreement (NAFTA) was that it would result in A) higher prices for consumer goods. B) loss of jobs in the U.S. economy. C) national security problems. D) increased illegal immigration from Mexico.
145)
One objective of NAFTA was to A) increase trade barriers between the countries involved. B) decrease investment opportunities in the countries involved. C) promote conditions of fair competition for the three trading partners. D) improve working conditions in Central America.
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146)
Although the details are still being negotiated, the expected successor to NAFTA is A) the ASEAN Economic Community. B) the United States–Mexico–Canada Agreement. C) Mercosur. D) the Central American Free Trade Agreement.
147) American companies that produce sophisticated military weaponry are prohibited from exporting that equipment to unfriendly governments, such as Iran. This complete ban on exporting sensitive technology to specific countries is an example of a(n) A) import quota. B) boycott. C) tariff. D) embargo.
148) The United States and China continue to spar over sociocultural issues, such as human rights, and economic and financial issues, such as the value of the Chinese yuan against the U.S. dollar. U.S. diplomats assert that these differences continue to bolster China's favorable balance of trade and increase the U.S. trade deficit. The trade protectionist policy exhibited by the Chinese is similar to an economic policy known as __________ that was followed during the seventeenth and eighteenth centuries. This policy resulted in a flow of money to the country that sold the most globally. A) trade embargoing B) countertrading C) profiteering D) mercantilism
149) The U.S. government announced a strict limit on unprocessed tuna imported from Asia. This type of trade restriction is called a(n)
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A) embargo. B) revenue tariff. C) import quota. D) export cap.
150) Denmark requires foreign companies that sell butter in Denmark to sell it in cubes, not tubs. This type of requirement is known as a A) protective tariff. B) revenue tariff. C) quota. D) nontariff barrier.
151) The U.S. government, responding to pressure from political lobbyists representing the U.S. steel industry, will impose a tax on steel products imported from South America. This is an example of a(n) A) protective tariff. B) revenue tariff. C) quota. D) embargo.
152) Having recently found sources of oil on their own land, a newly established nation enacted a tariff on imported petroleum in order to raise money for their new government. This trade restriction is an example of a __________ tariff. A) revenue B) protective C) percentage D) fixed
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153) A small nation has followed protectionist policies for many years. Which action is an example of a nontariff barrier established there? A) Establishment of a tax levied on imported goods so that foreign products are more expensive than competing domestic goods. B) Establishment of a tax levied on imported goods designed primarily to raise money for the government. C) Establishment of restrictive quality standards requiring foreign firms to make expensive modifications to their products before they can be imported. D) Participation in the Uruguay Round of GATT negotiations.
154) U.S. consumers purchasing olives can choose from Spanish, California, or Texas-grown varieties. Imported olives are subject to protective tariffs. What is this most likely to mean for U.S. consumers? A) Domestically grown olives are of higher quality. B) Consumers will be unable to buy Spanish-grown olives. C) Domestically grown olives will cost less. D) Spanish-grown olives will only be available in specialty stores.
155) Belgium, Hungary, Sweden, and Germany are all members of the EU. What statement is an accurate description of trade between these nations? A) Belgium and Germany are permitted to engage in free trade due to their proximity to each other, however, Sweden only has free trade with Finland, and Hungary only has free trade with Switzerland, Austria, and Croatia. B) The EU has abolished internal tariffs for these and other member nations and put in place a uniform system for taxing imports. C) Customs officers that collect tariffs have increased at the internal borders of all EU member nations. D) Belgium, Hungary, Sweden, and Germany conduct free trade between their nations, but not with other members of the EU.
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156)
The outlook for growth in global trade appears to be A) less optimistic than in the past. B) more interesting yet more challenging every day. C) unclear, but declining. D) nonexistent.
157)
Global trade with China is A) too risky and not worth the effort. B) illegal based on World Trade Organization (WTO) rulings. C) an emerging business opportunity for several companies. D) dependent upon the success of multinational corporations.
158) Many business experts contend that __________ will likely be the growth market of the future. A) Asia B) Central America C) South America D) the Middle East
159)
The "second wave" of offshore outsourcing refers to A) moving jobs to South America in addition to China. B) moving skilled service jobs offshore. C) moving jobs to India in addition to China. D) moving manufacturing jobs offshore.
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160) When U.S. firms choose to hire skilled and unskilled workers in other countries to produce goods and services, rather than producing them in the United States, we refer to this as A) offshore procurement. B) domestic outsourcing. C) foreign distribution. D) offshore outsourcing.
161) As students think about a career in the business world today, what is a good strategic suggestion? A) Study a foreign language. B) Secure a job with a large multinational corporation. C) Stay away from franchising due to its global saturation. D) Avoid studying fluctuations in currencies because a global currency is imminent.
162) Which nation has joined the U.S., Japan, and the EU as a key driver of the world economy? A) Thailand B) Brazil C) Russia D) China
163)
Trade experts' concerns about trading with China include its A) young average age and small population size. B) one-party political system, counterfeiting activities, and human rights abuses. C) ties with organized labor unions. D) economic philosophy that has changed from free market to command economy.
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164)
What is an advantage of offshore outsourcing? A) Companies can create efficiencies by hiring low-wage employees. B) Wages increase in the home country. C) Product quality improves permitting firms to charge more for their products. D) Communication between the company and its customers improves.
165)
Which statement is a good prediction of future occurrences in global markets?
A) Fortunately, safety issues will become less of a concern as developing nations begin to participate in global trade at a faster pace. B) It is doubtful that service and technical jobs such as accounting, legal representation, or financial management will become part of offshore outsourcing. C) China will continue to be the only viable global trader in Asia for several years to come. D) With the strong growth in technical talent globally, offshore outsourcing should continue to increase.
166) Don is a flight attendant for a large, international airline. While in China, Don often finds look-alikes of famous designer brands of watches, sunglasses, and golf clubs. In fact, he will often do some shopping for friends. Don's actions demonstrate A) a continual problem with product piracy in China. B) how expensive it is to trade with China. People who travel there are really the only ones who can benefit from China trade. C) the low level of economic development in China, and the fact that only tourists can afford to purchase name-brand goods in that nation. D) the World Trade Organization's encouragement of China to increase its production of counterfeit goods because there is a high demand for these globally.
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167) Ever since he was five years old, Rhett Tenna has had poor eyesight and as an eyeglass wearer he suffered through all the names that went along with it. Rhett eventually switched from glasses to contacts, but he always wondered why his glasses were not fashionable. After graduation from college, Rhett set out on a lifelong goal: to make eyewear synonymous with fashion. He opened a specialty store called "The Eyes Have It." His marketing plan was to remove the social stigma of wearing glasses, and replace it with a sense of flair and high fashion. From the day he opened his first store, Rhett's plan met with resounding success. Today, "The Eyes Have It" has grown from that single outlet to a medium-sized company with dozens of stores located in six states, and a manufacturing plant that turns out designer frames. A recent internal audit, however, suggested a problem that Rhett had not anticipated. The study indicated that the U.S. market is just about saturated and growth of "The Eyes Have It" stores will be very limited. The audit concerned Rhett until he recognized an untapped market existed overseas. If people all over the world have the same problem, the global market opportunities are fantastic! All in favor of going global say: "The Eyes Have It"!
167.1) At first, Rhett believed he should maintain all his manufacturing within the United States and simply export his designer frames to foreign sellers. However, he lacked expertise in exporting. Rhett decided to see if the federal government could provide any help by contacting a(n) A) World Trade Center. B) Export Assistance Center. C) Federal Reserve Bank. D) U.S. Export Savings Bank.
167.2) Although he is confident of success, Rhett is concerned that social, cultural, and economic differences in other nations may create some problems. He believes he should adapt his approach to these differences rather than trying to force the "American way" on foreign consumers. Rhett's attitude suggests that he wants to avoid a(n) __________ approach to business. A) ethnocentric B) flexible C) ethical D) countercultural
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167.3) Rhett heard predictions that the value of the U.S. dollar is likely to increase substantially over the next six months. This should A) hurt his overseas efforts since his prices will be very high. B) stop overseas efforts because dollars will not be negotiable. C) help his overseas efforts since his prices will be lower. D) force him into accepting no other currency except the dollar.
167.4) Rhett spoke with a Korean company that said it might be interested in producing his products in their market. They would pay him a royalty for what they sold and would bear all the start-up expenses of this effort. This Korean company is proposing a(n) A) subsidiary agreement. B) joint venture. C) export-trading company. D) licensing agreement.
167.5) The company was informed by the Taiwanese Ministry of Trade that they could only export 1.1 million pairs of eyeglasses to the Taiwanese market during a given year. The Taiwanese have imposed a(n) A) revenue tariff. B) embargo. C) import quota. D) limit order.
167.6) Next year, in order to cut both time and cost in getting new styles to global markets, Rhett plans to __________ a few of his designer lines. Rhett will send his designs to manufacturers in India, Bangladesh, and Turkey who will produce the eyeglasses in facilities in their respective countries. This will not only reduce the cost of labor, it will help Rhett reach regional markets in a timely manner.
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A) license B) contract manufacture C) franchise D) subsidize
168) Today, most companies doing business globally believe it is important for their employees to have experience working in other countries. ⊚ true ⊚ false
169)
Importing is the selling of products to another country. ⊚ true ⊚ false
170)
Exporting is the selling of products to another country. ⊚ true ⊚ false
171)
The United States imports more products and services than any nation in the world. ⊚ true ⊚ false
172)
The United States is the largest exporter in the world. ⊚ true ⊚ false
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173)
Competition among exporting nations is mild. ⊚ true ⊚ false
174) One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need. ⊚ true ⊚ false
175) Free trade is the movement of goods and services between nations without political or economic barriers. ⊚ true ⊚ false
176)
Global trade is the exchange of goods and services between countries. ⊚ true ⊚ false
177)
Global trade includes the exchange of art, sports, and cultural events. ⊚ true ⊚ false
178)
Absolute advantage is the basis for most global trade today. ⊚ true ⊚ false
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179) Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently. ⊚ true ⊚ false
180) A country has an absolute advantage if the production of a specific product is more efficient than all other nations. ⊚ true ⊚ false
181) Today, there are more countries that have some form of absolute advantage in a product or service than years ago. ⊚ true ⊚ false
182)
Free trade results in a mutually beneficial exchange between and among nations. ⊚ true ⊚ false
183)
Free trade can negatively impact some companies. ⊚ true ⊚ false
184)
Opportunities for college graduates in international business continue to decrease. ⊚ true ⊚ false
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185) An example of a U.S. import would be the purchase of oil by U.S. companies from Saudi Arabia. ⊚ true ⊚ false
186) According to the theory of comparative advantage, a country should buy from other countries those goods it produces most efficiently. ⊚ true ⊚ false
187) In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient. ⊚ true ⊚ false
188) Products made in Canada are sold in the United States because these two nations agree to eliminate economic and political barriers between nations. They participate in free trade. ⊚ true ⊚ false
189) Shortly after graduating college, Sherri took her place in her family's company in Miami. Sherri’s father and uncle started a company that buys unprocessed coffee beans from Costa Rica, and brings them into theUnited States for resale to several independent processing firms. The company is in the export business. ⊚ true ⊚ false
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190) Banana plantations in Hawaii cannot produce nearly enough of all the bananas consumed by Americans. The fact that theUnited States grows and sells bananas gives it a comparative advantage in bananas. It is not an absolute advantage and that is why we choose to import bananas from South America, as well. ⊚ true ⊚ false
191)
Small businesses are less involved in global trade today than in the past. ⊚ true ⊚ false
192) Many students in studying abroad programs at U.S. colleges and universities have discovered profitable opportunities by importing goods from their home countries into the United States. ⊚ true ⊚ false
193) International trade is not limited to multinational corporations. Small businesses do about one-third of all exporting out of the United States. ⊚ true ⊚ false
194) Just about anything that can be sold in the United States can also be sold to buyers in other countries. ⊚ true ⊚ false
195)
Foreign travel can help in identifying global business opportunities. ⊚ true ⊚ false
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196) If your business has an outstanding product, exporting offers a quick, easy, no-hassle way to improve your profitability. ⊚ true ⊚ false
197)
U.S. exports boost the U.S. economy. ⊚ true ⊚ false
198) A favorable balance of trade occurs when the value of a country's imports exceeds the value of its exports. ⊚ true ⊚ false
199) The balance of payments measures the inflows and outflows of money from tourism, foreign aid, military expenditures, and foreign investments as well as flows resulting from exports and imports. ⊚ true ⊚ false
200)
A trade deficit is the same as an unfavorable balance of trade. ⊚ true ⊚ false
201)
The United States enjoys a trade surplus in the global market. ⊚ true ⊚ false
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202)
The United States' highest trade deficit is with China. ⊚ true ⊚ false
203) Even though the U.S. exports a vast amount of goods globally, it exports a much lower percentage of its products than other countries do. ⊚ true ⊚ false
204) Dumping is the practice of selling products in foreign markets at lower prices than what domestic firms are charging for the same product. ⊚ true ⊚ false
205) In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge. ⊚ true ⊚ false
206)
The United States currently enjoys a favorable balance of trade with the rest of the world. ⊚ true ⊚ false
207) A favorable balance of trade occurs when the value of a nation's exports exceeds its imports.
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true false
208) In any given year, the United States cash outflow to other nations exceeds its cash inflow from other nations. ⊚ true ⊚ false
209) Though illegal in the United States, some firms will practice dumping in order to gain a foothold in a new market. ⊚ true ⊚ false
210) As the most powerful economy in the world, the United States does not need to concern itself with having an unfavorable balance of payments. ⊚ true ⊚ false
211) The "Connecting through Social Media" box describes the increasing importance of social media influencers to global companies of all sizes. ⊚ true ⊚ false
212) A small island nation exports $350 million of goods and services and imports $180 million of goods and services. It an unfavorable balance of trade of $170 million. ⊚ true ⊚ false
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213) If tourists from England spend money shopping and attending theater productions in New York, it will increase the United States's unfavorable balance of payments. ⊚ true ⊚ false
214) A South Korean steel manufacturer started selling certain categories of steel in the United States. However, the South Korean manufacturer is selling the steel at a price significantly lower than it sells the same product domestically. This practice may be a violation ofUnited States law. ⊚ true ⊚ false
215) Japanese auto manufacturers have invested billions of dollars in the United States by building new factories, warehouses, and offices. These investments create a favorable balance of payments for the United States. ⊚ true ⊚ false
216) When the U.S. provides foreign aid to countries abroad, a balance of payments outflow occurs. ⊚ true ⊚ false
217) If the value of German exports coming to the United States is greater than the value of the goods Germany buys from the U.S., this results in a U.S. trade deficit with Germany. ⊚ true ⊚ false
218) When competing in global markets, business organizations utilize a variety of strategies to reach foreign buyers.
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true false
219) Through licensing, domestic firms give foreign manufacturers/producers the right to produce their product and use their trademark in exchange for royalties. ⊚ true ⊚ false
220)
When a firm agrees to license its product, it gains publicity but gives up all revenues. ⊚ true ⊚ false
221)
Franchising is popular both domestically and internationally. ⊚ true ⊚ false
222) An advantage of licensing is that licensors spend little or no money to produce and market their products. These costs are paid for by the licensees. ⊚ true ⊚ false
223) The U.S. government is reducing the number of Export Assistance Centers due to decreased global competition. ⊚ true ⊚ false
224) Export-trading companies assist businesses in reaching buyers and dealing with customs, documentation, and payment.
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225)
true false
One advantage of licensing is the relatively low cost of entering a foreign market. ⊚ true ⊚ false
226) One advantage of licensing as a strategy to enter the global market is the sharing of trade secrets. ⊚ true ⊚ false
227) While franchising is popular in the United States, it is not an accepted strategy for firms in the global market. ⊚ true ⊚ false
228) One advantage of franchising is that the parent corporation does not need to concern itself with adapting to the culture of another country. ⊚ true ⊚ false
229) Contract manufacturing is when a firm pays foreign manufacturers to produce its product. The foreign manufacturer places the domestic company's label on the products. ⊚ true ⊚ false
230)
Contract manufacturing requires heavy start-up costs by the domestic company.
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231)
true false
Contract manufacturing is a form of outsourcing. ⊚ true ⊚ false
232) A joint venture is a partnership in which two or more companies join to undertake a major project. All parties commit financing and risk to the project. ⊚ true ⊚ false
233) According to current U.S. laws, American firms are prohibited from participating in joint ventures with foreign firms. ⊚ true ⊚ false
234) A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product. ⊚ true ⊚ false
235)
Foreign direct investment refers to the buying of goods produced in another country. ⊚ true ⊚ false
236)
Expropriation occurs when a host government takes over the assets of a foreign company.
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true false
237) A corporation that manufactures or markets its products in many different countries and has multinational stock ownership and management can be classified as a multinational corporation. ⊚ true ⊚ false
238) Firms with a physical presence in several different nations are considered multinational corporations. ⊚ true ⊚ false
239) Sovereign wealth funds are investment funds controlled by governments that hold large stakes in foreign companies. ⊚ true ⊚ false
240) Due to government restrictions, U.S. firms have not benefited from sovereign wealth fund investments. ⊚ true ⊚ false
241) One characteristic of an international joint venture is all parties sharing the risk of a major project. ⊚ true ⊚ false
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242) A firm looking to enter a foreign market with a limited investment should consider licensing. ⊚ true ⊚ false
243) A firm may export everything it produces overseas and still not be considered a multinational. ⊚ true ⊚ false
244) Strategic alliances almost always result in one company taking over the financial interests of another company. ⊚ true ⊚ false
245)
Governments directly participate in global markets through sovereign wealth funds. ⊚ true ⊚ false
246)
Global marketing strategies all involve the same amount of risk. ⊚ true ⊚ false
247) According to the "Adapting to Change" box, global franchises like McDonald's find success by insisting that franchisees adhere to its strict signage, layout, and menu guidelines developed in the United States.
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true false
248) When Nestlé, a Swiss company, purchased Ralston Purina, a U.S. company, Ralston Purina became a foreign licensee. ⊚ true ⊚ false
249) Contract manufacturing is a low-cost way for firms like Nike to outsource the production of its apparel and footwear. ⊚ true ⊚ false
250) Lindsay has a successful small business selling organic hair products with unique herbal scents. In order to expand her business, she wants to partner with firms in Asia to sell her products, but you suggest she license it to foreign companies and agree to royalties when they create the formula and sell it. Your advice makes better sense. ⊚ true ⊚ false
251) A Toyota assembly plant in Kentucky is an example of foreign direct investment in the United States. ⊚ true ⊚ false
252) Disney contracted with a firm in China to open a Disneyland theme park in Shanghai. This is an example of a joint venture. ⊚ true ⊚ false
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253) Good life Electronics has avoided contract manufacturing its fitness trackers abroad, as they cannot afford major start-up costs. They decide instead to investigate a joint venture with a similar firm. They have made the right decision. ⊚ true ⊚ false
254) The Tsingtao Brewing company pays a fee to Anheuser-Busch InBev for the right to brew and distribute Budweiser in China. Tsingtao is the licensor and the fee paid is a royalty. ⊚ true ⊚ false
255) The purchase of U.S.-based Anheuser-Busch by Belgian brewer InBev is an example of foreign direct investment. ⊚ true ⊚ false
256) The website for Clarkson Corporation notes that it manufactures paper-based consumer products with a headquarters in Georgia, and a physical presence in China, Brazil, and Mexico..Clarkson Corporation is an example of a multinational company. ⊚ true ⊚ false
257) In recent years, the government of Norway has invested billions of dollars in foreign companies, including several U.S. companies. This constitutes the creation of a sovereign wealth fund, an emerging type of foreign direct investment. ⊚ true ⊚ false
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258) Sociocultural, economic, and legal/regulatory hurdles cause significant challenges in global trade. ⊚ true ⊚ false
259) From a sociocultural perspective, U.S. businesspeople are often accused of ethnocentricity. ⊚ true ⊚ false
260) Successful multinational corporations disregard cultural differences between countries where they own property and perform business transactions. ⊚ true ⊚ false
261) Sociocultural differences that affect global businesses include customs, language, and religion. ⊚ true ⊚ false
262) In the past, foreign companies have adapted to U.S. culture more easily than U.S. firms have adapted to foreign cultures. ⊚ true ⊚ false
263) Effective human resource management styles are easily transferable from one culture to another.
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true false
264) Effective marketing strategies focus on the product and ignore the sociocultural differences in the global environment. ⊚ true ⊚ false
265)
Many U.S. companies fail to think globally. ⊚ true ⊚ false
266) An exchange rate is the value of one nation's currency relative to the currencies of other nations. ⊚ true ⊚ false
267)
Global markets consider the U.S. dollar to be a weak currency. ⊚ true ⊚ false
268) Under a system of floating exchange rates, the value of a country's currency is determined by government regulation. ⊚ true ⊚ false
269) Devaluation refers to a decline in the value of a nation's currency relative to other currencies.
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true false
270) Bartering is the exchange of goods or services for other goods or services without the exchange of money. ⊚ true ⊚ false
271) Countertrading is a form of exchange where firms will put certain products "on the counter," offering them to foreign customers at a cheaper price than what they would offer them to domestic customers. ⊚ true ⊚ false
272) Efficient currency exchange markets have eliminated countertrade in global business transactions. ⊚ true ⊚ false
273)
Currency fluctuations can be an advantage to firms trading in the global market. ⊚ true ⊚ false
274)
In global markets, there is not a central system of law. ⊚ true ⊚ false
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275) The Foreign Corrupt Practices Act of 1978 created an advantage for American businesspeople to compete in global markets. ⊚ true ⊚ false
276) Technological differences can prevent some companies from successfully doing business abroad. ⊚ true ⊚ false
277) The introduction of standardized international laws regulating business organizations has greatly simplified global trade. ⊚ true ⊚ false
278) The same proven management styles used by companies in their domestic operations should automatically be employed in their foreign subsidiaries. ⊚ true ⊚ false
279)
A devaluation of the U.S. dollar would make American goods cheaper to foreign buyers. ⊚ true ⊚ false
280) From a sociocultural perspective, foreign companies have experienced a good amount of success in adapting their products and services to the U.S. market. ⊚ true ⊚ false
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281) When it comes to ethics, successful American businesspeople are encouraged to follow all local customs and policies in other countries when doing business there. ⊚ true ⊚ false
282) Since patent and copyright laws are the same in all nations, they are not of much impact to firms that compete globally. ⊚ true ⊚ false
283) American business people often fail to adapt to foreign markets because they feel that American culture is superior to other cultures in the world. ⊚ true ⊚ false
284) Differences in electrical systems throughout the world could weaken a U.S. firm's ability to sell its products to other countries. ⊚ true ⊚ false
285) There's a problem overseas of the reproduction of music originally recorded by popular American artists. It seems that a recording madein the United States can be copied within a couple of hours and then immediately sold abroad. The U.S. government is able to readily prosecute these foreign companies. ⊚ true ⊚ false
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286) A United States company won a large contract with a company in Somalia by giving government and company representatives American cars. The company also promised to provide monetary gifts in exchange for the business. Fortunately, U.S. law, under the Foreign Corrupt Practices Act, permits U.S. companies to operate in this manner. ⊚ true ⊚ false
287) While travelling abroad, Oskar found that his U.S. dollars did not stretch as far as he had hoped. Every time he exchanged U.S. dollars for euros, he gave up more dollars in exchange for fewer euros. Obviously, the dollar was weak against the euro during this trip. ⊚ true ⊚ false
288) Midlands Recreation entered into an agreement with a large Japanese retailer to distribute its golf accessories in Japan. The company sees itself in a favorable position because the yen is gaining strength compared to the U.S. dollar, making it cheaper for Japanese customers to buy U.S. products. ⊚ true ⊚ false
289) A well-known American celebrity promoted a line of cosmetics that was accused of supporting child labor in an overseas factory. Although the celebrity's image was tarnished, she quickly was able to close down the unethical operation due to a violation of international law. ⊚ true ⊚ false
290) Global Gamers needs a special silicon substrate for production of its devices. The company executives knew that Kapoor Silicon Inc. was the best in the world at efficiently massproducing the product. This Indian company agrees to supply the silicon if it obtains a certain quantity of gaming hardware in return from Global Gamers. This beneficial exchange is described as countertrading.
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true false
291) Johanna Breese, a graduate student from Carnegie Mellon, connected with the culture of Madagascar when she created lambahoany (a native garment) with artful messages to save the more than 150 rare species of animals that inhabit Madagascar. In contrast to many Americans trying to do business abroad, Johanna successfully adapted her message to the native culture when she imprinted it on the native garment. ⊚ true ⊚ false
292) Trade protectionism is the use of government regulations to encourage the import of goods and services. ⊚ true ⊚ false
293) Countries often use trade protectionism measures to protect their domestic industries from foreign competition. ⊚ true ⊚ false
294)
Under mercantilism, the basic economic idea was to achieve a favorable balance of trade. ⊚ true ⊚ false
295)
Protective tariffs are designed to raise money for the government. ⊚ true ⊚ false
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296)
An import quota is a complete ban on the import or export of certain products. ⊚ true ⊚ false
297)
A complete ban on the import or export of a specific good is called an embargo. ⊚ true ⊚ false
298) Restrictive standards that detail exactly how a product must be sold in a country are examples of protective tariffs. ⊚ true ⊚ false
299) Though not as specific or formal as tariffs, nontariff barriers can be just as detrimental to free trade. ⊚ true ⊚ false
300) The main goal of the General Agreement on Tariffs and Trade (GATT) was to reduce trade restrictions among world nations. ⊚ true ⊚ false
301) The World Trade Organization (WTO) was established to mediate trade disputes among nations. ⊚ true ⊚ false
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302) A common market is a group of countries that have no internal tariffs among member nations, yet have a common external tariff. ⊚ true ⊚ false
303) A major goal of the Mercosur common market consisting of several South American countries is to better expand the movement of goods and services. ⊚ true ⊚ false
304) In 1999, the European Economic Community adopted a common currency known as the euro. ⊚ true ⊚ false
305) CAFTA permits the United States, Canada, and Mexico to reduce trade barriers with one another while maintaining independent trade agreements with other countries. ⊚ true ⊚ false
306) Since the approval of the North American Free Trade Agreement (NAFTA), the wage gap between Mexico and the United States has been significantly reduced. ⊚ true ⊚ false
307) Opponents of the North American Free Trade Agreement (NAFTA) warned that it would have serious economic consequences such as the loss of U.S. jobs.
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true false
308) The United States–Mexico–Canada Agreement (USMCA) includes new guidelines for digital trade and regulatory practices between the three nations. ⊚ true ⊚ false
309) According to the theory of mercantilism, a country should develop policies that encourage a favorable balance of trade. ⊚ true ⊚ false
310) If a protective tariff is placed on an imported product, the added cost will go to the government. ⊚ true ⊚ false
311) The ban on the sale of Cuban cigars in the United States is an example of an import quota. ⊚ true ⊚ false
312) Imported cheeses from France often sell at a higher price than similar cheeses produced in Wisconsin. This is likely due to the protective tariff that importers pay for the foreign cheese. ⊚ true ⊚ false
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313) The purpose of enacting some type of protectionist policy toward foreign goods is to limit competition from abroad, particularly when the country has domestic companies that produce and sell the same products and services. ⊚ true ⊚ false
314) The North American Free Trade Agreement (NAFTA) requires member nations to negotiate uniform trade agreements with nonmember nations. ⊚ true ⊚ false
315) With the achievements of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), nearly all barriers to trade expansion have been removed. ⊚ true ⊚ false
316) The objectives of the North American Free Trade Agreement (NAFTA) include allowing free immigration among Canada, Mexico, and the United States. ⊚ true ⊚ false
317) Since its adoption in 2006, the Central American Free Trade Agreement (CAFTA) has been mostly successful in improving trade between its members. ⊚ true ⊚ false
318) The United States remains confident that its interests are protected by the World Trade Organization. ⊚ true ⊚ false
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319) One of the rules of a common market is that all participating nations will uphold a common external tariff on goods and services imported from countries that are not of the trading bloc. Goods imported from nonmember countries are more expensive than goods coming from member countries. ⊚ true ⊚ false
320) If two nations have a trade dispute, the World Trade Organization may be asked to mediate and provide a decision within one year's time. ⊚ true ⊚ false
321) A small nationis developing an automotive industry but is struggling to compete with larger international automobile manufacturers. Other countries in its trading bloc have agreed on an import quota on other nations, which limits the number of cars that any country in the trading bloc can buy from other auto manufacturers. This strategy is necessary to help this auto manufacturer while it is in its infancy. ⊚ true ⊚ false
322) Australia requires that imported farm and mining machinery be subject to strict inspection measures. Some manufacturers refuse to trade with the country because the associated costs cut into their profits to the point where it just isn't worth it. Australia has created a nontariff barrier. ⊚ true ⊚ false
323) With all its perception of opportunity, the expansion of global trade is still plagued by terrorism, nuclear proliferation, rogue states, and other issues.
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true false
324) China presents enormous trading opportunities. However, due to political concerns there, foreign direct investment has halted. ⊚ true ⊚ false
325) While Asia represents an important source of U.S. imports, few export opportunities exist for U.S. firms to sell goods and services to Asian consumers. ⊚ true ⊚ false
326)
China is currently one of the three largest exporters in the world today. ⊚ true ⊚ false
327)
India is an emerging market that presents enormous business opportunities. ⊚ true ⊚ false
328)
Profitable opportunities in global markets are diminishing for U.S.-based businesses. ⊚ true ⊚ false
329) Offshore outsourcing is another term used to describe the act of U.S. firms selling their domestically manufactured goods to foreign customers.
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true false
330) A "second wave" of offshore outsourcing involves sizable numbers of skilled, welleducated, middle-income workers in service-sector jobs. ⊚ true ⊚ false
331)
One advantage of offshore outsourcing is that consumers often benefit from lower prices. ⊚ true ⊚ false
332) A concern with the second wave of offshore outsourcing is greater job loss for servicesector working Americans. ⊚ true ⊚ false
333) Only large firms have the resources needed to successfully compete in the global environment. ⊚ true ⊚ false
334) As a market for U.S. exports, China represents the only major business opportunity on the continent of Asia. ⊚ true ⊚ false
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335) China's one-party political system, its past human rights abuses, and issues related to counterfeiting of products continue to concern some U.S. firms about doing business there. ⊚ true ⊚ false
336) In the past few decades, U.S. manufacturers shifted focus from manufacturing and assembling products to the design and architecture of products. Now, a new shift: the offshore outsourcing of design and architecture can be an even more serious disruption to the U.S. economy. ⊚ true ⊚ false
337) Few barriers exist between U.S. and Indian markets, making it an easy entry point for entrepreneurs wishing to do business overseas. ⊚ true ⊚ false
338) Your college career is coming to an end and you're trying to decide on the last two business electives to take. You are leaning toward international marketing and international financing because you recall reading that opportunities will continue to grow in the developing nations of Asia and Africa. ⊚ true ⊚ false
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Answer Key Test name: chapter 3 6) B 7) A 8) D 9) A 10) A 11) D 12) D 13) B 14) C 15) D 16) B 17) D 18) B 19) A 20) C 21) A 22) D 23) C 24) A 25) C 26) A 27) B 28) A 29) C 30) C 31) C
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32) D 33) C 34) B 35) D 36) A 37) A 38) A 39) D 40) D 41) B 42) B 43) C 44) A 45) B 46) C 47) D 48) B 49) D 50) A 51) A 52) B 53) C 54) A 55) A 56) C 57) B 58) D 59) D 60) C 61) A
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62) A 63) B 64) B 65) D 66) C 67) C 68) B 69) D 70) B 71) A 72) A 73) A 74) C 75) B 76) B 77) B 78) A 79) C 80) A 81) B 82) A 83) B 84) C 85) A 86) A 87) D 88) C 89) D 90) B 91) B
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92) A 93) B 94) B 95) A 96) C 97) C 98) B 99) B 100) C 101) C 102) C 103) A 104) A 105) B 106) C 107) A 108) A 109) B 110) D 111) B 112) B 113) B 114) C 115) D 116) D 117) C 118) C 119) A 120) C 121) A
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122) D 123) A 124) C 125) A 126) C 127) D 128) A 129) B 130) C 131) D 132) C 133) A 134) C 135) D 136) D 137) D 138) B 139) B 140) B 141) C 142) D 143) D 144) B 145) C 146) B 147) D 148) D 149) C 150) D 151) A
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152) A 153) C 154) C 155) B 156) B 157) C 158) A 159) B 160) D 161) A 162) D 163) B 164) A 165) D 166) A 167) Section Break 167.1) B 167.2) A 167.3) A 167.4) D 167.5) C 167.6) B 168) TRUE 169) FALSE 170) TRUE 171) TRUE 172) FALSE 173) FALSE 174) TRUE 175) TRUE
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176) TRUE 177) TRUE 178) FALSE 179) TRUE 180) TRUE 181) FALSE 182) TRUE 183) TRUE 184) FALSE 185) TRUE 186) FALSE 187) FALSE 188) TRUE 189) FALSE 190) FALSE 191) FALSE 192) TRUE 193) TRUE 194) TRUE 195) TRUE 196) FALSE 197) TRUE 198) FALSE 199) TRUE 200) TRUE 201) FALSE 202) TRUE 203) TRUE 204) TRUE 205) FALSE
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206) FALSE 207) TRUE 208) TRUE 209) TRUE 210) FALSE 211) TRUE 212) FALSE 213) FALSE 214) TRUE 215) TRUE 216) TRUE 217) TRUE 218) TRUE 219) TRUE 220) FALSE 221) TRUE 222) TRUE 223) FALSE 224) TRUE 225) TRUE 226) FALSE 227) FALSE 228) FALSE 229) TRUE 230) FALSE 231) TRUE 232) TRUE 233) FALSE 234) FALSE 235) FALSE
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236) TRUE 237) TRUE 238) TRUE 239) TRUE 240) FALSE 241) TRUE 242) TRUE 243) TRUE 244) FALSE 245) TRUE 246) FALSE 247) FALSE 248) FALSE 249) TRUE 250) TRUE 251) TRUE 252) TRUE 253) FALSE 254) FALSE 255) TRUE 256) TRUE 257) TRUE 258) TRUE 259) TRUE 260) FALSE 261) TRUE 262) TRUE 263) FALSE 264) FALSE 265) TRUE
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266) TRUE 267) FALSE 268) FALSE 269) TRUE 270) TRUE 271) FALSE 272) FALSE 273) TRUE 274) TRUE 275) FALSE 276) TRUE 277) FALSE 278) FALSE 279) TRUE 280) TRUE 281) FALSE 282) FALSE 283) TRUE 284) TRUE 285) FALSE 286) FALSE 287) TRUE 288) TRUE 289) FALSE 290) TRUE 291) TRUE 292) FALSE 293) TRUE 294) TRUE 295) FALSE
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296) FALSE 297) TRUE 298) FALSE 299) TRUE 300) TRUE 301) TRUE 302) TRUE 303) TRUE 304) TRUE 305) FALSE 306) FALSE 307) TRUE 308) TRUE 309) TRUE 310) FALSE 311) FALSE 312) TRUE 313) TRUE 314) FALSE 315) FALSE 316) FALSE 317) TRUE 318) FALSE 319) TRUE 320) TRUE 321) TRUE 322) TRUE 323) TRUE 324) FALSE 325) FALSE
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326) TRUE 327) TRUE 328) FALSE 329) FALSE 330) TRUE 331) TRUE 332) TRUE 333) FALSE 334) FALSE 335) TRUE 336) TRUE 337) FALSE 338) TRUE Student name:__________ 1) Explain the difference between a compliance-based ethics code and an integrity-based ethics code.
2) Identify and discuss the five types of groups that serve as watchdogs. Also discuss how well companies enforce their ethical and social responsibility policies.
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3)
Identify the six-step approach to achieve a long-term improvement of business ethics.
4) Identify the three questions that an ethics-based manager should ask when facing a potentially unethical action, and provide an example of a situation where you would use these questions to evaluate a decision.
5) Identify and discuss the social responsibilities of a firm to three of the four stakeholder groups described in your textbook.
6) Provide examples that serve to explain the differences among the following terms: (1) corporate responsibility, (2) corporate social initiatives, (3) corporate philanthropy.
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7)
Obeying the law is __________ ethical behavior. A) essentially the same as B) the first step toward C) the opposite of D) unlikely to lead to
8)
__________ refers to standards of moral behavior. A) Legality B) Responsibility C) Integrity D) Ethics
9)
A recent study revealed that most Americans have A) strong and clear moral values. B) a strong desire to do what is right. C) few moral absolutes. D) a great desire to help their community.
10)
Which statement best describes ethical behavior in the United States?
A) Due to the diverse cultures that make up the United States it is difficult to identify any common standards of ethical behavior. B) The only common standards of ethical behavior in the United States are reflected in religious teachings. C) We can find common moral values that many Americans uphold, including respect for human life, self-control, honesty, integrity, and courage. D) Americans will generally describe the Golden Rule as the only statement of value that they uphold.
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11)
The danger in writing new laws to correct behavior is that A) people may begin to think that any behavior that is legal is ethically acceptable. B) people will see the difference between ethics and legality. C) legal behavior will become unsustainable. D) there will not be enough jails to house those who break the law.
12) Given the ethical lapses that are prevalent today in our businesses, what can be done to restore trust in the free-market system and leaders in general? A) Business leaders that have broken the law should be given another chance. B) New laws making accounting records transparent may help restore trust. C) Making the government accountable for business leader behavior will restore trust. D) Government must take over all businesses displaying ethical lapses.
13)
Laws represent the standards of __________ behavior. A) ethical B) legal C) moral D) socially responsible
14)
Ethical behavior covers a __________ range of conduct than legal behavior. A) broader B) more limited C) smaller D) less demanding
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15) Many individuals today believe that ethical behavior is determined by what is best for them at the time. This is an example of A) situational ethics. B) moral absolutes. C) the Golden Rule. D) legal behavior.
16) Considering the potential impact on others prior to making a decision is consistent with __________ behavior. A) legal B) anti-social C) ethical D) self-motivated
17) Many Americans define ethical behavior according to the situation in which they find themselves. This way of thinking suggests that there may be situations where A) it is absolutely wrong to cheat, steal, or lie. B) it might be okay to cheat, steal, or lie. C) everyone agrees on what is ethical. D) ethics must be regulated by the government.
18) of
Purposefully understating your firm's income to avoid paying higher taxes is an example
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A) an accepted business practice. B) tax accountants doing their job. C) illegal behavior. D) a firm's responsibility to its owners.
19) When police set up sobriety checkpoints, they aim to lessen drunk driving and save lives. While not required, the makers of apps that help users navigate around the checkpoints have complied with government and consumer group requests to stop operating. After studying about ethics and social responsibility, which statement applies to this situation? A) Laws represent the minimum guidelines that companies must follow, whereas a company's ethical stance may venture beyond the minimum level of compliance. B) App developers that keep operating are showing corporate social responsibility because they demonstrate primary concern for their investors. C) App developers no longer operating are acting philanthropically toward government. D) App developers that keep operating are acting both legally and ethically.
20) Titan Industries recently used intentional accounting irregularities to make the company look more profitable than it actually was. This means that Titan Industries A) provided its stockholders profit through a tax loophole. B) acted in an acceptable business manner. C) engaged in illegal behavior. D) executed its responsibility to its owners.
21) When Mandy graduated with a degree in computer science, she started her software company. On her first day of operations, she posted a sign that read, "This company will always operate within the legal limits of the law." Posted where all employees could clearly see it each day, this demonstrated
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A) her commitment to high ethical standards of behavior. B) her commitment to the Golden Rule. C) her expectation that all employees follow the laws that apply to the business. D) her aversion to immorality.
22) Employees at a start-up software company noticed that the owner overlooked certain questionable actions of a few high-billing associates. Other employees, who worked hard but only brought in an average number of new clients each month, were highly scrutinized. After you read this chapter about the ethical behavior of many Americans, which observation applies here? A) This story indicates that moral absolutes are very prevalent today in business settings. B) The owner will continue to operate this way until someone blows the whistle. C) We cannot expect people in the United States to all follow similar ethical patterns because there are too many cultures to deal with. Businesses are no different. D) As is often the case today, some leaders will look at each situation individually when making value judgments.
23) Which question will help individuals and organizations when deciding if their decisions are ethical? A) Can I do this without getting caught? B) Is it balanced? C) Has it been done before? D) Is there a desirable alternative?
24) When discussing moral and ethical issues, it is helpful to remember that ethical behavior begins with
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A) schools. B) religious institutions. C) law enforcement officers. D) each of us.
25)
The first and most basic step when facing an ethical dilemma is to ask A) "Is it legal?" B) "Is it balanced?" C) "How will it make me feel about myself?" D) "Is it profitable?"
26)
Which question can help us avoid a decision that would injure our self-esteem? A) Is it legal? B) Is it balanced? C) How will it make me feel about myself? D) How can I avoid taking the blame?
27)
It is accurate to state that ethical dilemmas in business A) force us to make poor choices. B) always end up bringing out the best in us. C) often force us to choose between equally unsatisfactory alternatives. D) define us as being moral absolutists or moral situationalists.
28)
Ethical behavior will typically result in
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A) mistrust between employees and managers. B) agreements that create benefits only for shareholders. C) negative publicity from the news media. D) improved self-esteem, making us feel good about our decision.
29)
Studies have found a strong relationship between academic dishonesty and A) later dishonesty at work. B) academic failure. C) future managerial downfall. D) financial success.
30)
An ethical dilemma refers to a situation where you must A) treat someone unfairly. B) choose between equally unsatisfactory alternatives. C) choose between a correct and an incorrect option. D) balance the concerns of profit and legality.
31) The box "Connecting Through Social Media" describes the launch of Generopolis, an online garage sale site. In developing her company, the site’s founder was most concerned with A) choosing between ethical behavior and profit. B) finding a legal solution to an ethical dilemma. C) encouraging personal ethical behavior. D) correcting social imbalances.
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32) A U.S. senator has just told you that for a generous contribution to her reelection fund, she would ignore your company's apparent violation of several antipollution laws. Which "ethics check questions" would you likely consider first? A) Is it legal? B) Is it fair and balanced? C) How will it make me feel about myself? D) Is it a generous amount?
33) After checking the receipt after leaving the restaurant, you notice the server failed to charge your group for several drinks. Everyone else says it is not a big deal, but you worry that the server may have to reimburse the charges out of her own paycheck. Which ethics-based question would be most helpful in evaluating this situation? A) Is it legal? B) Is it balanced? C) Who agrees with me? D) Will I get caught?
34)
Organizational ethics begins with A) traditional religious institutions. B) strong managers. C) an understanding of the law. D) the individual values of employees.
35)
Ethical behavior at work is learned by A) attending corporate responsibility seminars. B) tracking the failures of those who are caught in business scandals. C) reading about why others were fired from the job. D) observing the actions of others.
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36)
What is the most basic reason why a business should be managed ethically? A) It's the right thing to do. B) There are strict global regulations require it. C) It's the law in the United States. D) Your employees demand it.
37)
Relationships between businesses and among nations
A) should be based strictly on international law. B) should be based on fairness, honesty, openness, and moral integrity. C) should be scrutinized carefully to make some determination as to whether both sides have the same type of leader behavior when it comes to assigning work. D) will be adversarial because seldom does either side believe in win-win situations.
38)
Corporate values are A) a personal matter to be determined by each employee. B) taught by attending company-sponsored seminars. C) instilled by outside consultants. D) learned by observing the actions of others in the organization.
39)
When managers disregard the company's ethical concerns, the likely result is A) a reduction in employee turnover. B) an improvement in overall manager morale. C) a reduction in lawsuits. D) a general mistrust between workers and management.
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40)
Creating intense competition between employees within the corporation A) can encourage employees to deceive customers. B) will improve customer service. C) must be ignored when corporate ethics are developed. D) can bring out the best in employees.
41)
Following an ethics-based approach to decision making will normally lead to higher A) profits. B) trust and cooperation. C) prices. D) employee turnover.
42)
Following an ethics-based approach to decision making will normally lead to lower A) profits. B) employee turnover. C) prices. D) competition.
43) The president of Secure Home Monitoring wants to create a corporate ethics code which will benefit both employees and management. After studying successful companies, he determines the best strategy is to focus on A) fairness and honesty. B) strict penalties for illegal activities. C) a full-time compliance officer closely monitoring employee behavior. D) watchdogs and whistleblowers.
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44)
Which situation would most likely involve ethical concerns? A) overstating an expense report B) forecasting sales for the next year C) developing the marketing plan for the next year D) improving working conditions
45)
With respect to business ethics, it can be said "it takes two to tango." This indicates that A) dancing around issues should be part of a company's code of ethics. B) an individual's behavior is influenced by the behavior of others. C) teamwork eliminates a need for one's personal ethics. D) management is insensitive to ethical issues.
46)
Establishing a formal code of ethics is A) more common with small businesses than large businesses. B) unnecessary given the level of government regulation. C) growing in popularity. D) mandated by the Corporate and Criminal Fraud Accountability Act.
47) A(n) __________-based ethics code emphasizes the prevention of unlawful behavior by increasing control and penalizing wrongdoers. A) legal B) corporate responsibility C) compliance D) integrity
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48)
Which term describes someone who reports illegal or unethical behavior? A) whistleblower B) horn blower C) watch tower sentinel D) undercover agent
49) A(n) __________-based ethics code defines corporate values, creates a supportive environment, and stresses shared accountability among employees. A) social B) corporate responsibility C) compliance D) integrity
50)
Compliance-based ethics codes A) conform to U.S. laws and regulations. B) enable responsible employee conduct. C) use education, leadership, and accountability to reinforce the code. D) create a "do-it-right" climate that emphasizes core values.
51)
What is the best strategy to improve U.S. business ethics? A) Congress must pass an ethics bill. B) Ethics must be taught in every business school around the globe. C) A company's suppliers must be thoroughly investigated for ethical violations. D) Company leaders should adopt and support a corporate code of ethics.
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52)
After developing a code of ethics, it should be communicated to A) everyone with whom the business has dealings. B) the Attorney General in jurisdictions where the business has operations. C) all levels of management. D) stockholders.
53)
A whistleblower is a person who A) monitors employees who work overtime. B) reports illegal or unethical behavior in the corporation. C) reports health or other corporate emergencies to 911. D) works in the human resource department.
54)
What is a characteristic of an effective ethics officer? A) background in human resource management B) exceptionally organized C) capacity to serve as a counselor and an investigator D) communicates primarily via e-mail
55)
Compliance-based ethics codes typically A) rely on laws and regulations outside the firm for guidance. B) stress shared accountability among employees. C) promote a "do-it-right" climate. D) define the company's guiding values.
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56)
A very critical last step in the process of establishing an ethics code is A) middle management support. B) training. C) enforcement. D) identification of the organizational ethics officer.
57)
What describes a unique focus of an integrity-based ethics code? A) increased control over employee actions B) shared accountability among employees C) increased penalties for code violators D) improved awareness of the relevant laws
58) In 2010, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a provision permits whistleblowers to A) remain at their jobs, after reporting a securities violation. B) receive up to 30% of the penalty funds that exceed $1 million that the courts recover from companies proven to be in violation. C) represent securities violations only in the companies where they are employed. D) automatically receive up to a $1 million dollar reward for reporting a securities violation, as well as retain their job.
59)
What is the benefit of employing an ethics officer?
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A) This professional serves as a law enforcement officer, with the authority to arrest employees who do not abide by the ethics code. B) This individual writes the ethics code and keeps this document current. He has sole authority to change the document as he sees fit. C) This professional has the responsibility to make certain that the ethics code remains a private company document; outside stakeholders should be excluded from ethical concerns. D) This individual's job is dedicated to objectively investigating ethics breaches. If necessary, employees feel comfortable with communicating confidentially to this professional.
60) While speaking with your sales team, your manager explains, "Anyone caught breaking a sales law will be fired." After reading about business ethics, you quickly identify this remark as a reference to the firm's __________ ethics. A) technology-based B) personal responsibility-based C) compliance-based D) integrity-based
61) The faculty and administration staff at your local community college are trained to ask about your career preferences, instead of suggesting courses that may not benefit your future goals. Even though it would be tempting to advise students to take extra courses just to increase the college's enrollment, employees know that it is more important to serve each student well, even if it means suggesting courses and/or degrees offered at other institutions. This approach is consistent with A) an integrity-based ethics code. B) a compliance-based ethics code. C) a response to a government mandate. D) a personal responsibility commitment.
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62) Mason is a CPA for a large company. Recently, he noticed that the company's accounting records significantly overstated the amount of inventory on hand, leading to an overstatement of assets the company holds. Initially, Mason brought it to the attention of his supervisor, but when nothing was done to correct the mistake, he decided to report it to the appropriate government official. Mason was counting on current law, under the __________, to protect him against company retaliation. A) Cellar-Kefauver Act B) Sarbanes-Oxley Act C) Robinson-Patman Act D) Sherman Act
63) A phone call to a government official by an employee of the Enron Corporation disclosed the deception and dishonesty of the firm's accounting records. This employee played the role of a A) whistleblower. B) horn blower. C) ethics officer. D) moral policeman.
64) After spending several months developing a good relationship with a business client, Arjun's client is now purchasing substantial amounts of products from Arjun's company, resulting in high commissions for him. Noticing his success, a colleague of Arjun's started visiting the same client to try to capture some of this business. Although this colleague considers it "legal and fair game," other sales reps now avoid him because they consider it a violation of A) company-based ethics. B) compliance-based ethics. C) integrity-based ethics. D) whistleblowing-based ethics.
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65) Terrell is a recent hire at a sporting goods store. On his first day, the store manager handed him a small booklet listing company rules. He was asked to read it and sign and submit the last page, before starting his work. Among other things, the rules explicitly discussed punishments for grievous behavior and firing if the firm could prove that the employee was stealing product from the store. This booklet represented the __________ of the store. A) company-based ethics B) compliance-based ethics C) integrity-based ethics D) whistleblowing-based ethics
66)
A firm's corporate social responsibility describes its A) exclusive responsibility to its stockholders. B) ability to plan for the unexpected. C) commitment to a management training program. D) concern for the welfare of society.
67)
All else being equal, socially responsible firms A) are viewed more favorably by consumers. B) enjoy significantly higher profits. C) often experience customer loyalty problems. D) fail to earn sufficient profits for their owners.
68)
We describe charitable donations by corporations to nonprofit organizations as A) corporate philanthropy. B) corporate responsibility. C) corporate strategy. D) structural commitment.
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69) The position a firm takes on issues that affect the corporation as well as society is known as its A) political philanthropy. B) corporate policy. C) target posturing. D) structural positioning.
70) In recent years, progressive firms have embarked upon __________, where they will commit company resources and expertise toward helping in broad-based humanitarian situations. A) corporate philanthropy B) corporate social activism C) social civility D) corporate social initiatives
71)
Corporate __________ covers issues such as treating employees fairly and ethically. A) responsibility B) philanthropy C) diversity D) structure and strategy
72)
Determining what is involved for a firm to be socially responsible A) is clear-cut and easy. B) varies, and has several dimensions. C) helps government officials develop appropriate legislation. D) varies from industry to industry due to different laws.
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73)
A payoff for socially conscious behavior is A) new and loyal customers. B) a large pool of investors. C) a large pool of talented employees. D) longevity due to a stable external environment.
74)
Which statement best describes a firm's commitment to its customers? A) The firm is responsible for offering domestic products to foreign customer markets. B) A firm's social responsibility to customers is clear-cut. C) Customers will only support companies who make a visible effort to keep prices low. D) Firms must offer real value to gain customer trust.
75) Companies are effectively using __________ to communicate their corporate social responsibility actions to their customers. A) sales promotion B) internal newsletters C) social media D) word of mouth
76)
A recent Supreme Court ruling made it easier to prosecute insider trading cases by A) specifying exactly what type of information can and cannot be disclosed. B) prohibiting current or former public officials from realizing stock market gains. C) considering even those who share insider information without profiting guilty. D) doubling massive fines for those guilty of insider trading.
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77)
Insider trading involves A) an online activity that establishes a barter exchange system between businesses. B) investors using private company information to further their own fortunes. C) the exchange of assets between companies in the same industry. D) a payment or reward for socially conscious behavior.
78)
If a business fails to meet its responsibilities to its employees, what is likely to occur? A) reduced employee turnover B) employees believe it is easier to get ahead C) more jobs are created D) employees do the minimum needed to get by
79) In order to avoid insider trading, the Securities and Exchange Commission (SEC) has adopted a new rule called __________ that requires publicly traded companies to release information to everyone in a timely manner, rather than just to a few persons. A) Insider Trading Policy B) Regulation FD (Fair Disclosure) C) Red Herring Regulation D) PDI (Public Display of Information Act)
80) People need to make a living. Under this circumstance, one of the best social programs a firm can offer is A) a job. B) a commitment to programs that promote green living. C) a high-end product line. D) flexible work hours.
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81) The difference between an organization's positive social contributions and its negative social impacts is called their A) social scorecard. B) responsibility impact report. C) net social contribution. D) community commitment level.
82) The purpose of a(n) __________ is to evaluate an organization's progress toward implementing programs that are socially responsible and responsive. A) accountability review B) social audit C) federal disclosure statement D) annual report
83)
Going green means A) increased global warming. B) increasing one's bottom line, before any other social considerations. C) increasing one's carbon footprint. D) increasing one's initiatives toward a concern for the environment.
84)
It's accurate to say that the green movement A) is not a good strategic consideration for contemporary firms. B) will never benefit a firm financially. C) is benefiting all firms financially. D) has created jobs.
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85)
One factor causing businesses to vigorously enforce ethical standards is the A) desire to eliminate employee turnover. B) fear of negative publicity. C) focus on criminal penalties. D) evasion of social audit measurements.
86) When it comes to social responsibility, some people feel that "before you can do good, you must do well." This reflects a firm's primary responsibility to its A) customers. B) investors. C) employees. D) community.
87)
Some critics of corporate social responsibility view spending money on CSR as A) a necessary evil. B) stealing from investors. C) important for globalization. D) moving toward capitalism.
88)
When a firm undertakes corporate social initiatives, it is A) making donations that are directly related to a company's competency. B) making long-term commitments to one cause. C) hiring a diverse workforce. D) creating safe products.
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89)
Environmental quality is considered to be a public good. This means that A) ultimately it is the public that pays for environmental clean-up. B) businesses have a responsibility to minimize their environmental pollution. C) everyone enjoys a cleaner environment regardless of who pays for it. D) society places a higher value on private goods and services.
90) Many businesses have developed internal procedures to enforce their ethical policies. What is an example of an outside group urging ethical behavior in businesses? A) management teams B) union officials C) suppliers D) sales representatives
91)
A firm's carbon footprint is A) the number of employees it hires in a specific community. B) its legacy in terms of how much public good it dispersed over its lifetime. C) the amount of carbon it releases in its effort to do business. D) the measurable level of carbon within its facilities.
92)
One problem with conducting a social audit is
A) that most businesses are really not very concerned with these issues. B) how to determine what should be measured and how to calculate the effect on society. C) that it detracts from the interests of stakeholders. D) extensive governmental regulations and red tape.
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93)
The social audit is
A) a company report that always includes a net social contribution. B) a government-mandated report required of all firms that have a business license. C) a company evaluation that measures the firm's social contributions inside and outside of the firm. D) a ratio developed to compare a firm's corporate philanthropy to its profits.
94)
An important source of public scrutiny is watchdogs. These are
A) the combined members of a firm's competitors and external stakeholders. B) taxpayer-supported government agencies that limit a firm's ability to compete in foreign markets. C) local and federal legislators who oversee all companies and organizations. D) socially conscious groups that monitor how well companies enforce their ethical and social responsibility policies.
95) When Carrie's Chicken Shack uses in-store recycling and composting, and cleans with nontoxic detergents, it is participating in corporate A) philanthropy. B) social initiatives. C) responsibility. D) policy.
96) The management staff at Andy's Service Center believes the company has a social responsibility to its community. They believe that the company can have the greatest impact in this area through cash contributions to local nonprofit organizations. This is an example of
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A) graduated payments. B) corporate philanthropy. C) structure and strategy. D) short-run profit maximization.
97) When Mission Plumbing allows its employees paid time off to volunteer for the local food pantry, the company is participating in A) a corporate social initiative. B) corporate policymaking. C) corporate philanthropy. D) corporate responsibility.
98) Before it was publicly known that IBM was going to take over Lotus Development, an IBM secretary told her husband, who told two co-workers, who told friends, relatives, business associates, and even a pizza delivery man. A total of 25 people received the information and traded on this tip to make a profit. These people were A) acting really smart. B) participating in insider trading. C) stealing from IBM. D) acting fairly.
99) When Blake Mycoskie started TOMS, he took the concept of __________ to a new level. With its well-known "one for one" shoe giving program, TOMS social causes are directly related to the firm's expertise of selling shoes. A) social auditing B) corporate social initiative C) corporate policy D) corporate philanthropy
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100) Management's philosophy at Nike has often been that a fit body contributes to more productivity at work. Nike provides exercise facilities at its headquarters in Beaverton, Oregon, and lets employees use work time each day to relieve stress through exercise. This serious position on physical fitness is part of Nike's A) corporate philanthropy. B) corporate policy. C) community mediation services. D) social justice promotion.
101) Blake's Bookshop is interested in keeping employees, customers, and the general public aware of the activities and programs it has accomplished within the community this past year. The company might consider performing a A) competitor analysis. B) responsibility review. C) social audit. D) annual report.
102) Last week, Citizens' Greener Evanston sent a formal letter to the city requesting that it measure its carbon footprint and publicly disclose the amount of fertilizer and other carbonemitting substances it is using on its public parkways and community parks. Citizens' Greener Evanston is an example of A) a socially conscious investor group. B) a watchdog group. C) a disgruntled nonprofit organization that has a beef against the city. D) a public employee group demonstrating social responsibility.
103)
Ethical problems and issues of social responsibility are
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A) unique to firms involved in global trade. B) unique to the United States. C) not unique to the United States. D) less important now than in the past.
104)
When working with international firms, U.S. businesses A) tend to ignore the ethics of their international partners. B) expect socially responsible behavior from their business partners. C) feel that their responsibility is limited to the United States. D) try to avoid judging international business partners by U.S. standards.
105)
Top leaders in government and business today are A) held to higher ethical standards than in the past. B) held to less strict moral standards than in the past. C) less interested in social responsibility than in the past. D) at odds with the general public in regard to ethical issues.
106)
What is an unresolved ethical issue that surrounds global trade? A) product quality B) labor standards C) transportation issues D) time to market issues
107)
The Foreign Corrupt Practices Act deals with
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A) prison labor involved in international trade. B) environmental issues in international waters. C) bribery to obtain business. D) product safety concerns.
108)
International issues of social responsibility and ethical behavior are A) the result of greed found in capitalist countries. B) found primarily in countries with a low standard of living. C) a concern only of business professors. D) difficult and not as clear-cut as U.S. firms would like them to be.
109) What best indicates that U.S. businesses are demanding socially responsible behavior from their international suppliers? A) the establishment of the Equal Opportunity Employment Commission B) the decision of Walmart to open stores worldwide C) the decision of Nike to monitor labor conditions in its foreign contract factories D) the creation of the North American Free Trade Zone (NAFTA) between the United States, Canada, and Mexico
110)
According to the "Reaching Beyond Our Borders" box, which statement is true? A) Corporate ethics are intended to be consistent with cultural ethics. B) Corporate ethics have priority over corporate profit. C) Corporate profits have priority over corporate ethics. D) Corporate ethics can clash with cultural ethics.
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111) The boxed material entitled "Reaching Beyond Our Borders" that told the story about Joe, the telecommunication employee, suggests that U.S. firms operating overseas are A) not as flexible on social issues as local employees would like them to be. B) exploiting employees by working them long hours at low pay. C) complying with the ethical standards of the people they employ, in the countries in which they are operating. D) responding to their stockholders' desire for profits.
112) As a recent college graduate, Eli started working for an export trading company. His job has already taken him around the globe on several occasions. He was amazed to see the difference in working conditions in the developing nations he visited, as opposed to similar operations in the United States. The expectations of workers were not the same. Eli's experience is an example of A) corporate philanthropy differences in different countries. B) social responsibility differences between similar firms, but in different countries. C) differences in corporate social initiatives in foreign nations. D) the need for whistleblowers abroad.
113) Megan, Erin, and Ryan are in the middle of a heated discussion. The trio are the chief operating officers of the Frozen Fun Ice Cream Corporation and are reviewing the latest financial reports. Intense competition has resulted in deceased profits. Each of the three officers has his or her own view of how to help the company turn around. Megan suggests cutting costs by firing union workers and hiring replacement employees at lower wages. She has asked the firm's attorney to find a loophole in the contract that will allow for this action. Erin protests, stating that Megan's proposal is unethical and unfair. Erin believes that every stakeholder should be treated equally, and that profiting at the expense of others is reckless. Ryan, agreeing in part with Erin, states, "We must be sensitive to all affected parties, but clearly our primary goal is to make a profit for our investors." In an attempt to resolve the conflict between Megan and Erin, Ryan offers an alternative suggestion: reduce the firm's charitable contributions until acceptable profit levels rise. Erin is outraged and reminds Ryan of the social responsibilities that Frozen Fun Ice Cream has to the community, environment, suppliers, employees, and investors.
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113.1) Megan is concerned about the legality of her idea of firing union workers in order to hire employees willing to work for less pay. Megan values __________ ethics, but has little concern for other types. A) integrity-based B) compliance-based C) socially-based D) policy-based
113.2) Erin recommends a marketing strategy aimed at increasing sales through the development of a positive corporate image. She suggests the first step toward this goal is to identify and evaluate the firm's programs for community involvement. Erin is calling for a(n) __________ to be completed. A) strategic plan B) social audit C) socialist review D) annual report
113.3)
On which of the three ethics check questions would Megan primarily focus?
A) Is it legal? B) Is it fair and balanced? C) How will it make me feel about myself? D) Is this a win-win situation?
113.4) Ryan's view tends to lean toward the concerns of investors, first and foremost. This is the view taken by
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A) corporate philanthropists. B) Franklin D. Roosevelt. C) the late Milton Friedman, famous economist. D) a watchdog such as an environmentalist.
113.5) If management adopts Ryan's suggestion of reducing Frozen Fun Ice Cream's charitable donations until profits grow, the company will essentially reduce its A) corporate citizenship. B) nonprofit volunteerism. C) corporate philanthropy. D) RF factor.
114) The Enron scandal illustrates the difference between unethical behavior and illegal behavior. ⊚ true ⊚ false
115)
Ethical behavior requires more than following the law. ⊚ true ⊚ false
116)
Legal behavior and ethical behavior are basically the same. ⊚ true ⊚ false
117) A society gets into trouble when people consider only what is illegal and not also what is ethical or unethical.
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⊚ ⊚
118)
true false
Ethical behavior refers to the standards that are accepted by society as true or false. ⊚ true ⊚ false
119) People should look at each situation individually and decide for themselves if it is right or wrong. ⊚ true ⊚ false
120) Given the level of diversity within the United States, agreement on common standards of ethical behavior is unachievable. ⊚ true ⊚ false
121) An accurate statement regarding this chapter is: "Business law establishes ethical behavior." ⊚ true ⊚ false
122) Legal behavior is directly related to our relationships with others, while ethical behavior is not. ⊚ true ⊚ false
123)
Legal behavior is a first step toward ethical behavior.
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⊚ ⊚
true false
124)
Laws that protect us from fraud, theft, and violence determine ethical behavior. ⊚ true ⊚ false
125)
Moral behavior refers to behavior that is accepted by society as right rather than wrong. ⊚ true ⊚ false
126)
Ethical behavior focuses on treating others fairly. ⊚ true ⊚ false
127) Making accounting records more transparent may help restore trust in the free-market system and leaders in general. ⊚ true ⊚ false
128) Punishing business leaders who have broken the law may help restore trust in the freemarket system and leaders in general. ⊚ true ⊚ false
129) Making businesspeople more accountable for company actions may help restore trust in the free-market system and leaders in general.
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⊚ ⊚
true false
130) People involved in business may be tempted to do something unethical in order to increase sales and profits, but rarely do because the law clearly defines harsh punishments for unethical actions. ⊚ true ⊚ false
131) Kyle and his college friends often spend weekends hanging out at a small pub. Last weekend Kyle took the salt and pepper shakers from the table because they needed a set at their apartment. In this situation, this was not an unethical action because it was a restaurant and potential loss is figured into the prices. ⊚ true ⊚ false
132) Ethical behavior involves the clear and easy choice of right and wrong actions toward others. ⊚ true ⊚ false
133) Both managers and workers cite low managerial ethics as a major cause of U.S. businesses' competitive woes. ⊚ true ⊚ false
134)
A common form of cheating in schools today is plagiarizing online material. ⊚ true ⊚ false
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135)
Making ethical choices is always easy. ⊚ true ⊚ false
136) Two recent studies found no correlation between academic dishonesty among undergraduates and dishonesty at work. ⊚ true ⊚ false
137)
The question "Is it legal?" is the defining criteria for establishing ethical behavior. ⊚ true ⊚ false
138) It can be very difficult to maintain a balance between ethics and goals such as pleasing stakeholders. ⊚ true ⊚ false
139) Trying to make decisions that will benefit all parties involved is consistent with the question "How will it make me feel about myself?" ⊚ true ⊚ false
140)
While telling an abusive joke about an ethnic group may not be unlawful, it is unethical. ⊚ true ⊚ false
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141) An ethical manager's decisions are based only on the following questions: "Is it legal?" and "Is it profitable?" ⊚ true ⊚ false
142) Behavior that is in conflict with your values and sense of right and wrong can damage your self-esteem. ⊚ true ⊚ false
143) The first step in improving society's moral and ethical behavior is by making a commitment to improving business's moral and ethical behavior. ⊚ true ⊚ false
144) Utilizing the phrase "the ends justify the means" as a corporate value system can negatively impact company morale and competitiveness. ⊚ true ⊚ false
145) Ronald often takes longer lunch breaks than allowed. Tianna uses her work computer to update her personal Twitter account on company time. Jackson misrepresents his product to a potential customer. All of these are examples of unethical behavior. ⊚ true ⊚ false
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146) In reality, ethical behavior depends on the situation. For example, in negotiating a contract with your employees, the way they win higher wages is by your losing the fight to hold down labor costs. You realize it is a win-lose relationship. ⊚ true ⊚ false
147) You are in a business meeting at work that requires your group to make an ethical decision. Your willingness to post the final decision on the bulletin board in the break room for all to see passes the test: "How will it make me feel about myself?" ⊚ true ⊚ false
148) You're working as a human resources director for a small company. Part of your job is to assess the company's benefits plan. There are several workers utilizing the company daycare facility. However, some workers have been asking for an onsite workout room with equipment. The current daycare facility would be a perfect location, and would cost the company far less each month. Under these circumstances, eliminating the daycare is a balanced decision. ⊚ true ⊚ false
149) Nancy owns a small online retail business. On her company website, she asks customers to mark a box if they are willing to let her share their personal information with her suppliers. By asking this question, Nancy is addressing privacy issues, and covering her actions in case someone should try to sue her for sharing private information. She is responding to the question, "Are my proposed actions legal?" ⊚ true ⊚ false
150) Trust between workers and managers must be based on a foundation of fairness, honesty, openness, and moral integrity. ⊚ true ⊚ false
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151) A growing number of people feel that an employee's ethics are a personal matter, and have nothing to do with management. ⊚ true ⊚ false
152)
Management can create an environment in which unethical behavior can develop. ⊚ true ⊚ false
153)
Corporate values, like personal values, are learned by observing what others do. ⊚ true ⊚ false
154) Effective corporate values start with employees and develop throughout the organization to include top management. ⊚ true ⊚ false
155) In order to maintain a good reputation, it is good strategy to manage your business ethically. ⊚ true ⊚ false
156) A business should be managed ethically to keep existing customers and attract new customers. ⊚ true ⊚ false
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157)
One good reason for managing a business ethically is to help reduce employee turnover. ⊚ true ⊚ false
158)
In order to do the right thing for all stakeholders, a business should be managed ethically. ⊚ true ⊚ false
159)
Overly ambitious business goals and employee incentives can lead to unethical behavior. ⊚ true ⊚ false
160) Employers should proceed cautiously when designing an employee incentive program that rewards employees strictly on increased sales. ⊚ true ⊚ false
161)
Employees observe behavior, which helps instill standards of right and wrong. ⊚ true ⊚ false
162)
As a manager, you have a responsibility for the unethical behavior of your employees. ⊚ true ⊚ false
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163) In order to avoid the costly act of being sued in court, it makes good sense to manage your business ethically. ⊚ true ⊚ false
164) "Do what I say, not what I do" can be an effective code of conduct to instill corporate values. ⊚ true ⊚ false
165) "Actions speak louder than words!" is an old saying that refers to the fact that people's actions—how they act as opposed to what they say—are often testament to their true ethical values. ⊚ true ⊚ false
166) Recently, Leisure Life Inc., an athletic clothing company, agreed to adopt higher ethical standards with respect to contract manufacturers producing their goods. Company leadership agreed this was a good approach to avoid the U.S. government's intervening and creating new laws to force the entire industry to work only with foreign manufacturers who operate with high ethical standards. This was sensible strategy on the part of the clothing and soft goods industry. ⊚ true ⊚ false
167)
Integrity-based ethics codes are based on avoiding legal punishment. ⊚ true ⊚ false
168)
The goal of a compliance-based ethics code is to prevent unlawful behavior.
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⊚ ⊚
169)
true false
Businesses with a formal code of ethics are less common now than in the past. ⊚ true ⊚ false
170) Compliance-based ethics codes focus on preventing unlawful behavior by increasing control and by penalizing wrongdoers. ⊚ true ⊚ false
171) In order to be successful, efforts to improve the ethical behavior of businesses must begin with top management's support of a corporate code of conduct. ⊚ true ⊚ false
172) Employees or other insiders who report illegal or unethical behavior are called whistleblowers. ⊚ true ⊚ false
173) As a result of pressure from business lobbyists, there is no legislation protecting whistleblowers. ⊚ true ⊚ false
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174) The job of an ethics officer is to serve as a counselor for employees and as an investigator for the company. ⊚ true ⊚ false
175)
Enforcement is perhaps the most important step in an effective code of ethics. ⊚ true ⊚ false
176) A code of ethics designed to avoid criminal misconduct is an example of a compliancebased ethics code. ⊚ true ⊚ false
177) An integrity-based ethics code moves beyond legal compliance in order to create a "dothe-right-thing" climate. ⊚ true ⊚ false
178) To be effective, an organization's code of ethics should be kept in-house and not communicated to outsiders such as suppliers, subcontractors, and customers. ⊚ true ⊚ false
179) Since most ethics violations are small and rather insignificant in nature, employees need to understand that addressing these issues is secondary to making profits. CEOs may be justified in ignoring these small problems and waiting for more convenient moments to address them. ⊚ true ⊚ false
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180) U.S. business ethics can improve simply by requiring written contracts with employees, customers, and owners. This alone will do the job! ⊚ true ⊚ false
181) An important step in improving U.S. business ethics is for companies to hire whistleblowers. ⊚ true ⊚ false
182) The president of a large firm urges his employees to find and use legal loopholes to gain a competitive advantage whenever they can. In keeping within the legal limits of the law, the employees are within their compliance-based ethical codes. ⊚ true ⊚ false
183) Beer brewers, both large and small, often encourage their customers to drink responsibly. This reflects a compliance-based approach to ethics. ⊚ true ⊚ false
184) Tobacco companies label their products with warnings of the potential health hazards that could occur from smoking. Due to the fact that this is a government-mandated disclosure, it is part of the industry's compliance-based ethics. ⊚ true ⊚ false
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185) A large amount of retail theft is committed by employees; therefore, Luxe Looks requires that managers personally unlock fitting rooms and count the number of items taken to the fitting rooms by not just customers but sales associates too. This policy is written in the company manual and breaking with the policy is grounds for dismissal. It is correct to say that this is part of Luxe Looks compliance-based ethics. ⊚ true ⊚ false
186) At Summit Services, clients have a right to do business with whichever consultant they choose. It is not out of the ordinary for a financial consultant to lose a client to another consultant in the same office. If it is a high–net worth client, with the potential for high commissions on sales, the incentive to steal a fellow worker's client exists because the firm's culture has not established integrity-based ethics to deter this activity. ⊚ true ⊚ false
187) Corporate social responsibility refers to the concern businesses have for the welfare of society. ⊚ true ⊚ false
188) Corporate philanthropy refers to the position a firm takes on issues that affect society, such as environmental sustainability. ⊚ true ⊚ false
189) A donation to an animal shelter contributed by a corporation is an example of corporate philanthropy. ⊚ true ⊚ false
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190) Business issues such as treating employees fairly and ethically are part of corporate responsibility. ⊚ true ⊚ false
191)
Corporate philanthropy refers to the position a firm takes on social and political issues. ⊚ true ⊚ false
192) When stating a firm position on various social and political issues, corporate policies often commit company profits to back these positions. ⊚ true ⊚ false
193) Surveys show that a majority of Millennials are willing to agree to lower salaries if they know their employer is participating in socially responsible activities. ⊚ true ⊚ false
194) In the discussion of corporate social responsibility, stakeholders and stockholders refer to the same group. ⊚ true ⊚ false
195) Awareness of a company's CSR behaviors often influences the purchasing decisions of Generation Z.
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⊚ ⊚
true false
196) Studies show that consumers are not concerned about the socially conscious behavior of the firms with which they do business. ⊚ true ⊚ false
197) Customers learn to trust companies that consistently demonstrate good behavior. Those same companies can lose this position with one socially irresponsible activity. ⊚ true ⊚ false
198) Some investors believe it makes financial as well as moral sense to invest in companies whose practices promote sensitivity toward the environment. ⊚ true ⊚ false
199) "Fair disclosure" refers to a Securities and Exchange Commission rule that states when a publicly traded firm discloses information, it must share it with everyone. ⊚ true ⊚ false
200) Insider trading occurs when employees of publicly traded companies use private company information to profit in the stock market. ⊚ true ⊚ false
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201) Insider trading provides the information needed for the securities markets to operate fairly and efficiently. ⊚ true ⊚ false
202)
Businesses fulfill a social responsibility by creating jobs. ⊚ true ⊚ false
203)
Promoting social justice is a responsibility of society, but not business. ⊚ true ⊚ false
204)
In the long run, a firm's loyalty to their employees can pay off financially. ⊚ true ⊚ false
205)
Getting even is one of the most powerful incentives for good people to do bad things. ⊚ true ⊚ false
206)
The green movement has impacted few firms. ⊚ true ⊚ false
207) A social audit is a systematic evaluation of an organization's progress toward implementing programs that are profitable.
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⊚ ⊚
208)
true false
The green movement has created U.S. jobs. ⊚ true ⊚ false
209) A firm's net social contribution is a company report that measures the difference between its positive social contributions and its negative social impact. ⊚ true ⊚ false
210)
A social audit measures a firm's progress in the area of worker satisfaction. ⊚ true ⊚ false
211) Watchdogs (including customers, socially conscious investors, and environmentalists) monitor how well firms enforce their ethical and social responsibility policies. ⊚ true ⊚ false
212) A business that takes a public position on a political issue that affects the welfare of society is exercising corporate social responsibility. ⊚ true ⊚ false
213) Defining a socially responsible company is complicated. Businesses differ from other businesses, as well as the people they serve, on what we mean by "socially responsible."
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⊚ ⊚
true false
214) Opponents of corporate social responsibility argue that when companies use their profits to promote social causes, they are not being fair to investors who provided the funds for the purpose of financial gain. ⊚ true ⊚ false
215) A corporate policy should never make a value statement about the environment or other social and political issues because it is doubtful the company can live up to the proclamation. ⊚ true ⊚ false
216) Corporate social responsibility covers all those social issues outside our businesses that affect customers and the environment, but not internal issues such as employee considerations and work safety. Internal issues are covered by business laws. ⊚ true ⊚ false
217) Some experts feel that corporate responsibility means solely making money for stockholders. ⊚ true ⊚ false
218) In a famous speech, former President John F. Kennedy proposed that businesses had four basic rights, and in his own words, he proclaimed that "each one of them leads us back to the right to keep the profits from one's business." ⊚ true ⊚ false
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219) Often it is the threat of negative publicity that pressures businesses to enforce their corporate code of ethics. ⊚ true ⊚ false
220) Although the green movement is a social trend, it is difficult to predict its future importance. ⊚ true ⊚ false
221) era.
Social responsibility investing is now on the decline, after a brief surge during the Enron ⊚ ⊚
true false
222) A computer chip manufacturer knowingly sold flawed chips and decided not to tell its customers of the possible problems. When it became public knowledge, however, the firm's stock price fell dramatically. This demonstrates the value that investors place on the ethical behavior of businesses. ⊚ true ⊚ false
223) At a recent town hall meeting, citizens expressed concern regarding the impact of a proposed new casino. The owner of the proposed casino responded, "I don't know what all of this fuss is about. I'm just a businessman trying to earn a profit, provide new jobs, and pay taxes." His response reflects an overall commitment to corporate social responsibility. ⊚ true ⊚ false
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224) Haven Farms, a large insurance company in the Midwest, announced that 3% of its profits would be donated toward environmental concerns in its headquarters state. The CEO said, "In honor of several hundred employees that come to work here every day, we want to give something back." Since this is only helping one area, the donation falls outside the realm of corporate social responsibility. ⊚ true ⊚ false
225) Clean Color Paint Co. promotes its products as nontoxic and made from natural, organic substances. The paints are safe for all persons, including those with asthma and other lung conditions. If consumers learn that Clean Colors' paints do not meet their expectations, their reaction is likely to tarnish the company's image. ⊚ true ⊚ false
226) Shortly after Bank One bid on the purchase of a smaller community bank, a story hit the local news about the investigation into the purchase of several thousand shares of stock of Bank One by three of its top executives, just prior to the merger announcement. Upon close examination by the SEC (Securities and Exchange Commission) it was determined that the stock purchases were an illegal maneuver on the part of these executives. This is an example of insider trading. The executives were "banking" on the stock price rising sharply when the purchase announcement was made public. ⊚ true ⊚ false
227) Sharon is a stockbroker. A client just called to purchase thousands of shares of his company's stock. He reveals to her that the company is soon announcing the appointment of a new superstar CEO. Sharon asks her client if this information is public knowledge. The reason she asks is to make certain that her client, her company, and she remain in compliance with Regulation FD, the fair disclosure rule.
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⊚ ⊚
true false
228) Recently, Nathan was trying to choose among three mutual fund investments for his retirement account. As a socially conscious investor, he will prefer to invest in funds that hold the stocks of traditional energy companies, as opposed to greener wind-turbine and renewable energy companies. ⊚ true ⊚ false
229) U.S. businesses claim that unethical business practices are common outside the United States. ⊚ true ⊚ false
230) The ethical standards by which international government leaders are judged are more lenient today than they were in years past. ⊚ true ⊚ false
231) Many U.S. companies are demanding socially responsible behavior from their international suppliers. ⊚ true ⊚ false
232) As U.S. ethical standards are very clear-cut, international suppliers do not have difficulty adhering to them. ⊚ true ⊚ false
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233) The objective of the Inter-American Convention Against Corruption document formulated and signed by the Organization of American States is to identify common global ethics. ⊚ true ⊚ false
234) The International Organization for Standardization (ISO) published a standard on social responsibility called ISO 26000. ⊚ true ⊚ false
235) U.S. businesses consider the Foreign Corrupt Practices Act as legislation that has helped increase their profits abroad. ⊚ true ⊚ false
236) All U.S. companies practice the same ethical standards when dealing with suppliers and contract manufacturers abroad. ⊚ true ⊚ false
237) Due to their significant economic power, large multinational firms can ignore the ethical standards of a society without consequences. ⊚ true ⊚ false
238)
U.S. businesses have little influence over the behavior of businesses from other countries.
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⊚ ⊚
true false
239) Applying the ethical standards of the United States to foreign firms is a difficult process for U.S. firms. ⊚ true ⊚ false
240) The vast majority of U.S. firms are unconcerned about their dealings with corrupt foreign suppliers. ⊚ true ⊚ false
241) While "doing the right thing" is an admirable code of ethics, there are no international organizations dealing with global ethics and corruption. ⊚ true ⊚ false
242) Due to the complicated laws and ethical standards abroad, most U.S. businesses adopt a "don't ask, don't tell" policy. ⊚ true ⊚ false
243) According to the "Reaching Beyond Our Borders" box, corporate ethics can clash with cultural ethics, especially in global business. ⊚ true ⊚ false
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244) In the "Reaching Beyond Our Borders" box, the story proves that a large multinational company can ask its employees to follow, and should expect them to follow, the same ethical standards they would practice if living and working within the U.S. borders. ⊚ true ⊚ false
245) In the "Reaching Beyond Our Borders" box, the story demonstrates the many ethical similarities between North and South American businesses. This is fortunate for large firms that do business south of the U.S. border. They can depend on their subsidiary firms to have no problems when implementing U.S. company employee policies. ⊚ true ⊚ false
246) An American clothing manufacturer was sued in New York courts by watchdog groups that discovered the poor working conditions in its manufacturing plants in a U.S. territory. These groups are typically concerned with human rights abuses and other problems with supplier relationships at home and abroad. ⊚ true ⊚ false
247) Emilee owns a boutique and is ordering jewelry made using semiprecious stones from a supplier in Mexico. Due to low wages in Mexico, her supplier promised an excellent wholesale price for these goods. You agree with Emilee when she explains that international business law is very clear-cut with these dealings. As long as the supplier is not breaking any labor laws in his or her country, her social responsibility is covered. ⊚ true ⊚ false
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Answer Key Test name: chapter 4 7) B 8) D 9) C 10) C 11) A 12) B 13) B 14) A 15) A 16) C 17) B 18) C 19) A 20) C 21) C 22) D 23) B 24) D 25) A 26) C 27) C 28) D 29) A 30) B 31) C 32) A
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33) B 34) B 35) D 36) A 37) B 38) D 39) D 40) A 41) B 42) B 43) A 44) A 45) B 46) C 47) C 48) A 49) D 50) A 51) D 52) A 53) B 54) C 55) A 56) C 57) B 58) B 59) D 60) C 61) A 62) B
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63) A 64) C 65) B 66) D 67) A 68) A 69) B 70) D 71) A 72) B 73) A 74) D 75) C 76) C 77) B 78) D 79) B 80) A 81) C 82) B 83) D 84) D 85) B 86) B 87) B 88) A 89) C 90) B 91) C 92) B
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93) C 94) D 95) C 96) B 97) C 98) B 99) B 100) B 101) C 102) B 103) C 104) B 105) A 106) B 107) C 108) D 109) C 110) D 111) A 112) B 113) Section Break 113.1) B 113.2) B 113.3) A 113.4) C 113.5) C 114) FALSE 115) TRUE 116) FALSE 117) TRUE
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118) FALSE 119) FALSE 120) FALSE 121) FALSE 122) FALSE 123) TRUE 124) FALSE 125) TRUE 126) TRUE 127) TRUE 128) TRUE 129) TRUE 130) FALSE 131) FALSE 132) FALSE 133) TRUE 134) TRUE 135) FALSE 136) FALSE 137) FALSE 138) TRUE 139) FALSE 140) TRUE 141) FALSE 142) TRUE 143) FALSE 144) TRUE 145) TRUE 146) FALSE 147) TRUE
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148) FALSE 149) TRUE 150) TRUE 151) FALSE 152) TRUE 153) TRUE 154) FALSE 155) TRUE 156) TRUE 157) TRUE 158) TRUE 159) TRUE 160) TRUE 161) TRUE 162) TRUE 163) TRUE 164) FALSE 165) TRUE 166) TRUE 167) FALSE 168) TRUE 169) FALSE 170) TRUE 171) TRUE 172) TRUE 173) FALSE 174) TRUE 175) TRUE 176) TRUE 177) TRUE
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178) FALSE 179) FALSE 180) FALSE 181) FALSE 182) TRUE 183) FALSE 184) TRUE 185) TRUE 186) TRUE 187) TRUE 188) FALSE 189) TRUE 190) TRUE 191) FALSE 192) TRUE 193) TRUE 194) FALSE 195) TRUE 196) FALSE 197) TRUE 198) TRUE 199) TRUE 200) TRUE 201) FALSE 202) TRUE 203) FALSE 204) TRUE 205) TRUE 206) FALSE 207) FALSE
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208) TRUE 209) TRUE 210) FALSE 211) TRUE 212) TRUE 213) TRUE 214) TRUE 215) FALSE 216) FALSE 217) TRUE 218) FALSE 219) TRUE 220) FALSE 221) FALSE 222) TRUE 223) FALSE 224) FALSE 225) TRUE 226) TRUE 227) TRUE 228) FALSE 229) TRUE 230) FALSE 231) TRUE 232) FALSE 233) TRUE 234) TRUE 235) FALSE 236) FALSE 237) FALSE
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238) FALSE 239) TRUE 240) FALSE 241) FALSE 242) FALSE 243) TRUE 244) FALSE 245) FALSE 246) TRUE 247) FALSE Student name:__________ 1) Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?
2) What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.
3) What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?
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4) How does a limited liability company (LLC) compare to an S corporation? What are the major advantages and disadvantages of an LLC?
5) Describe and differentiate between the three types of corporate mergers. Give an example of each type.
6) Franchising is a key component of the U.S. economy. What are the major advantages and disadvantages of franchising?
7)
The __________ is the most common form of business ownership.
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A) partnership B) corporation C) joint venture D) sole proprietorship
8)
A __________ is a form of business that is owned, and usually managed, by one person. A) cooperative B) subchapter S corporation C) sole proprietorship D) limited partnership
9) __________ comprise about 20% of all businesses but account for about 81% of U.S. business receipts. A) Corporations B) Partnerships C) Sole proprietorships D) Limited liability companies
10)
To many businesspeople, one of the major attractions of a sole proprietorship is A) the ability to obtain additional financial resources. B) the protection of limited liability. C) guaranteed financial success. D) the chance to be their own boss.
11)
The __________ is usually the easiest form of business to start and end.
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A) sole proprietorship B) limited partnership C) corporation D) cooperative
12)
One of the major disadvantages of a sole proprietorship is the A) possibility of disagreements between owners. B) unlimited liability the owner has for the debts of the firm. C) threat of double taxation on income. D) high cost of starting or ending the company.
13)
Starting a new business as a sole proprietorship A) requires retaining the services of an attorney. B) is simple, but requires expensive fees and licensing. C) is usually simpler and less expensive than starting other forms of ownership. D) is very similar to starting a business as a corporation.
14)
In a sole proprietorship, the profits earned by the business are
A) taxed as income for the business, but exempt from the personal income tax paid by the owner. B) taxed at the lowest corporate rate. C) the property of the owner, except for taxes owed to the government. D) tax-free if the appropriate exemption is filed with the local government.
15)
With respect to taxes, the sole proprietorship
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A) pays taxes on the profits of the business at the comparable corporate rate. B) pays taxes on the profits of the business, at the owner's personal tax rate. C) pays taxes only if there are no expenses associated with the business. D) is permitted to determine its own tax rate and schedule of payments.
16)
A significant disadvantage of owning a sole proprietorship is the A) difficulty associated with ending the business. B) heavy tax liability that must be assumed. C) overwhelming time commitment often required of the owner. D) lack of incentives to motivate the owner.
17)
What usually happens to a business when its sole proprietor dies? A) The sole proprietor's heirs have the option of taking over the business. B) The business must be sold to a larger corporation. C) The company continues to function as it always has. D) The company always closes down.
18)
Unlimited liability means A) when you own your own business, you are responsible for all the business debts. B) you are only liable for the money you invest in the business. C) as a franchisee your franchisor is responsible for the debts of the franchise. D) you are liable for whatever advertising promises your firm makes.
19)
Any debts or damages incurred by a firm organized as a sole proprietorship are
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A) the responsibility of the owner. B) limited to the amount the owner has invested in the firm. C) paid for out of a reserve contingency fund required by law. D) normally covered by liability insurance.
20) An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a A) sole proprietorship. B) cooperative. C) C corporation. D) general partnership.
21)
Which statement is the most accurate?
A) Sole proprietorships are well suited for people who want to own a business and share in its profits without taking an active role in management. B) Sole proprietorships are taxed at the owner's personal tax rate. C) Sole proprietorships are the least risky form of business ownership. D) Sole proprietorships must receive state and federal licensing before conducting business.
22) Although sole proprietors do not pay any special taxes, as the owner of the business you are also an employee of the business, which requires you to A) pay income tax only one time each year. B) pay self-employment taxes. C) pay for the right to get an employee identification number. D) file an income tax return for the business.
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23)
As a sole proprietor, being your own boss means
A) reducing your working hours. B) enjoying extensive vacations and benefits, particularly when just beginning the business. C) accepting accountability for the mistakes of the business. D) having limited financial resources to throw into the business.
24) Eddie operates an antiques shop as a sole proprietorship. However, he is in poor health and may be unable to continue running the business. If Eddie becomes incapacitated, his business A) automatically continues under new management as a sole proprietorship. B) automatically converts into a public corporation with stock sold to interested investors. C) ceases to exist unless sold or taken over by Eddie's heirs. D) becomes the property of the most senior employee who wishes to continue operating the firm.
25) Mariko has a lot of business knowledge and is confident in her abilities to open a successful store. She recently opened a custom gift basket shop as a sole proprietor. She is expecting a high level of profits and is looking forward to A) the lower corporate tax rate paid by sole proprietorships. B) keeping all of the money she earns except for the taxes she is required to pay. C) keeping all of the money she earns since she does not have to pay taxes as a sole proprietor. D) easily raising additional large sums of money from the capital markets since she is a sole proprietor.
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26) Grace owns a dog-walking business that she started in high school. Her first goal was to earn money after school and supplement her allowance. Now that she has finished college and maintains a long client list, she plans to run the business full time. She keeps all the profits and has kept things simple by relying on word-of-mouth to obtain new clients. Grace's business is a(n) A) sole proprietorship. B) franchise. C) S corporation. D) partnership.
27)
Gabriel wants to start his own business. He should consider a sole proprietorship if he A) expects rapid growth and wants to be able to raise a large sum of money. B) wants to make it easy to attract qualified employees. C) wants to be his own boss and can accept unlimited liability. D) wants to minimize the financial risk he must accept as the owner of a business.
28) Riley is the sole proprietor of a golf shop. Because she is a sole proprietor, any profit Riley's business earns is A) totally tax-free. B) taxed only as Riley's personal income. C) taxed twice, once as business income, then again as Riley's personal income. D) taxed only if and when it is distributed to investors.
29) Andreas owns a roofing business. He enjoys being his own boss, but it comes at a price. Often, his days are filled with organizing the activities of the employees and seeking out new customers. He often misses events with friends and family because of the obligations of running his own business. He also knows that he has unlimited personal liability for any of his firm's debts. Andreas' business is organized as a(n)
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A) joint venture. B) C corporation. C) S corporation. D) sole proprietorship.
30) Kerry wants to start a business. She has two goals. First, she doesn't have much money but she's ready to get business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Kerry chooses a sole proprietorship, she would A) achieve both goals since this form of ownership is both the easiest to form and the least risky. B) meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability. C) not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability. D) achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business.
31) In a partnership, a(n) __________ partner (owner) actively manages the company and has unlimited liability for claims against the firm. A) unlimited B) limited C) general D) associate
32) A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds they invested is known as a(n) __________ partner.
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A) implied B) limited C) partial D) general
33) The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond A) the firm's total assets. B) the amount they have invested in the company. C) the percentage of profits they are entitled to earn. D) their total personal assets.
34) According to the Uniform Partnership Act, the three key elements of any general partnership are A) a board of directors, a written partnership agreement, and a well-defined product or service. B) two owners, an adequate financial base, and a written statement describing the manner in which profits and losses will be divided. C) common ownership, shared profits and losses, and right to participate in managing the operations. D) common stock, a board of directors, and a statement of limited liability.
35) A type of partnership called a __________ acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.
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A) limited partnership B) combined general partnership C) cooperative partnership D) master limited partnership
36) Compared to a sole proprietorship, what is considered an advantage of a general partnership? A) ability to pool financial resources B) unlimited liability for all owners C) equal division of profits among owners D) ease and flexibility in transferring shares of ownership to others
37)
In a limited liability partnership, each partner's risk of losing personal assets is
A) unlimited. B) limited to losses that result from that partner’s own acts and omissions and the acts and omissions of those who work under that partner’s supervision. C) determined entirely by the maximum loss provision established by the articles of copartnership. D) nonexistent.
38)
What is an advantage of a partnership? A) ease of starting and ending the business B) unlimited liability C) shared management and pooled skills D) little time commitment
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39)
When entering into a new partnership, a good strategy is to A) avoid written agreements, as this limits the partnership's flexibility. B) put the partnership agreement in writing. C) plan to incorporate as soon as possible. D) agree to put the first year's profits back into the partnership.
40)
One difference between partnerships and sole proprietorships is that partnerships
A) take less effort to form. B) are managed by an elected board of directors. C) have the advantage of limited liability. D) have a greater chance of long-term survival due to the accountability of each partner to the other.
41)
Which statement about partnerships is most accurate? A) A partnership is a corporation with fewer than 100 owners. B) A major advantage of a partnership is that it offers all owners limited liability. C) A major drawback of a partnership is that it is difficult to terminate. D) Partnerships are taxed at the lowest corporate tax rate.
42) When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they A) are less risky, because each partner is responsible for only a specified fraction of the firm's debts. B) are easier to terminate. C) cost less to organize. D) give the firm a stronger financial foundation.
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43) A good reason why partners should spell out the details of their partnership arrangements in writing is A) the partnership is not a legally recognized business unless they do so. B) a written agreement will help reduce misunderstandings and disagreements among the partners. C) putting the agreement in writing will limit the liability of each partner to a specified level. D) doing so will make it easier to convert the business to a corporation at a later date.
44)
A master limited partnership (MLP) is A) not traded on the stock exchanges. B) subject to double taxation like a corporation. C) taxed like a partnership. D) the corporate form of choice for small groups of individuals.
45) One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a A) master limited partnership. B) sole proprietorship. C) limited amount of time each can actively spend in the business. D) limited liability partnership.
46) Dominic is a limited partner in a local financial consulting company. One of the general partners in the company needs a temporary leave to attend to some personal matters. She has asked Dominic to perform her managerial duties during this absence. As a limited partner, Dominic
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A) can fill in as a manager whenever necessary, as long as it is for only a limited time. B) can make managerial decisions as long as they do not involve the payment of money. C) cannot participate in the management of the partnership. D) can manage the firm as long as he gets approval from the company's other general partners.
47) Alice and her four siblings are starting their own home design business. One of their primary goals is keeping the loving relationship they currently enjoy, so they are following the Model Business Corporation Act recommendations as they write their partnership agreement. What is an accurate recommendation of the Act? A) The business should be actively operating for an extended period before the partners decide who is responsible for what business functions. B) Family businesses never take on outside partners, so no discussion of this need take place. C) There should be discussion and well-understood ways that the partners will handle disagreements. D) Due to the fact that they are all under 40 years old and expect to work until they are 65, there is no need to decide what will happen to the partnership if one decides to leave the business or retire, or dies.
48) Shaya is opening an international food store. Though her products will span the globe, she wants to focus on items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. It's apparent Shaya wants to A) limit her personal liability to the amount she personally invests in the company. B) keep all of the firm's profits. C) obtain a strong financial base for the firm while maintaining personal control over the firm's management. D) meet the legal requirements of the Uniform Partnership Act.
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49) Rafe and Rocky own a heating and cooling firm that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Rafe and Rocky operate as a A) joint venture. B) general partnership. C) limited partnership. D) cooperative.
50) Bridget and Lauren invested all their savings in a small coffeehouse they opened near a large university. They operated the business as a general partnership. After 11 months, the business went broke and the women were left with outstanding bills close to $50,000, which was more than their initial investment in the company. Bridget and Lauren can A) lose their personal assets as the result of their company's financial problems. B) lose only the funds they originally invested in their company. C) lose only the total value of the assets actually used to operate the business. D) avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it.
51) Jay and Anna plan to pool their money and talents to form a general partnership and start a music school. One of the first things Jay and Anna should do is A) investigate venues where their students can perform. B) consult an attorney and put their agreement in writing. C) pay the partnership formation fee to their state's commerce commission. D) plan their vacation and work schedules for the year.
52) Adesh has agreed to invest $19,000 in a partnership with his brother and sister-in-law. Not being in the same line of work as them, Adesh does not intend to actively work in the partnership. He also does not want to risk any of his own assets other than the $19,000 investment. The partnership has agreed to permit him to share in the profits. As an expert on forms of business ownership, you know that Adesh is a __________ in this partnership.
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A) general partner B) preferred stockholder C) secondary partner D) limited partner
53) Fran and her siblings created a design company called Bright Home LLP. Although key business functions are centralized, each sibling is a licensed architect that designs, builds, and installs residential and commercial buildings for his/her own clients. Unfortunately, an installation of Fran's resulted in water damage to the basement of the client's new home. The limited liability partnership A) guarantees that none of the company's partners will lose more than the amount they invested in the company. B) guarantees that only those partners who were directly involved in designing and building this home face unlimited liability for claims against the firm. C) protects the partners from any suit by the client. D) will enable the firm to quickly reorganize with only minor financial losses.
54) A(n) __________ is a state-chartered legal entity with authority to act and to have liability separate from its owners. A) limited partnership B) conventional corporation C) unlimited partnership D) sole proprietorship
55)
An owner of a corporation is known as a
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A) general partner. B) limited partner. C) director. D) stockholder.
56)
Which statement about the operation of a corporation is correct?
A) A corporation receives its charter from a state government. B) A corporate charter automatically expires in 99 years and must be renewed if the corporation wants to remain in business. C) Owners of a corporation have unlimited liability for any claims against their company. D) A corporation tends to be much easier to set up than a sole proprietorship or partnership.
57) The form of business ownership best suited to raising large amounts of money for expansion is the A) sole proprietorship. B) partnership. C) corporation. D) cooperative.
58) What is an advantage of the corporate form of business when compared to sole proprietorships and partnerships? A) ease of formation B) lower taxes C) simplified paperwork D) limited liability of owners
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59) Compared to partnerships and sole proprietorships, a major advantage of the conventional C corporation as a form of business ownership is that it A) has the ability to raise more money. B) is easier and less expensive to form. C) qualifies for simplified tax treatment. D) creates unlimited liability for its owners.
60)
What is normally considered a disadvantage of the corporate form of business? A) limited liability of owners B) difficult transfer of ownership C) limited life D) double taxation of earnings
61)
What entity elects the board of directors for a corporation? A) creditors B) stockholders C) managers D) employees
62)
A separation between ownership and management is most likely to occur in a A) sole proprietorship. B) general partnership. C) corporation. D) limited liability partnership.
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63)
One disadvantage of __________ is the initial cost of formation. A) corporations B) general partnerships C) sole proprietorships D) limited partnerships
64) the
The form of business ownership that usually requires the most detailed record keeping is
A) corporation. B) partnership. C) sole proprietorship. D) limited partnership.
65)
A major advantage of S corporations is that they A) can have more stockholders than a C corporation. B) can operate in foreign nations as if they were domestic corporations. C) require less paperwork to set up than a C corporation does. D) avoid the problem of double taxation associated with conventional corporations.
66) One reason many companies do not organize themselves as an S corporation is that this form of business A) is subject to a higher tax rate than a general partnership. B) does not provide owners with limited liability. C) has a special eligibility restriction, which many businesses are unable to meet. D) is much more difficult to set up than C corporations.
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67)
To qualify as an S corporation, a company must
A) have no more than 50 shareholders. B) have shareholders who are individuals or estates and qualify as citizens or permanent residents of the United States. C) have a different class of stock for each owner. D) have not more than 5% of income derived from passive sources.
68)
The income generated by S corporations A) passes through to its owners, and each is taxed individually for this income. B) is provided to nonprofit organizations, so it is considered a tax-free source of funds. C) is taxed separately from its owners. D) must be reinvested in the business. Owners should not expect dividends.
69)
Limited liability companies are companies that are similar to S corporations but they A) provide no asset protection for owners. B) distribute profits in proportion to investments. C) are not restricted with similar eligibility requirements. D) are taxed as corporations.
70)
One disadvantage of a limited liability company is that it A) requires all earnings of the business be taxed at the corporate rate. B) requires members' approval to transfer ownership. C) requires the owners to divide up profits and losses in a fixed proportion. D) has a more restrictive ownership requirement than S corporations.
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71)
One reason limited liability companies have become so popular is that they
A) can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation. B) allow owners to sell their interests in the company without requiring approval from other owners. C) have unlimited life. D) permit owners to avoid paying self-employment taxes on the company's profits.
72)
Earnings of C corporations can be
A) taxed twice if they are distributed as dividends to stockholders. B) taxed at twice the going rate of a partnership or sole proprietorship. C) taxed by the federal government, but they are exempt from state taxes if the corporation owns any facilities within that state. D) taxed the same as a partnership.
73)
What is an attractive benefit of a corporation? A) Corporations can enjoy double taxation. B) Corporations can be formed quickly and inexpensively. C) Corporations can protect their owners with unlimited liability. D) Corporations can attract employees by offering stock options.
74)
The reason professionals such as lawyers or doctors would incorporate their business is to A) protect their management decision-making process from competitors. B) comply with the law because insurance companies require that they be corporations. C) protect their other assets with limited liability. D) protect their assets with unlimited liability.
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75)
Which statement about S corporations is most accurate?
A) The major attraction of S corporations is that they avoid the problem of double taxation. B) S corporations are similar to C corporations, except that the majority of owners are foreign investors. C) Any corporation willing to pay the necessary fees and fill out the required paperwork can become an S corporation. D) Only large corporations with operations in more than one state can qualify to be classified as S corporations.
76)
The organizational structure of a corporation permits A) the company management to elect the board of directors. B) stockholders to elect the board of directors. C) stockholders to elect the officers and management team. D) employees to elect the officers of the company.
77)
Which statement is the most accurate? A) A foreign corporation does business in one or more states, but is chartered in another
state. B) A foreign corporation is 50% owned by individuals or companies from another nation. C) A foreign corporation is headquartered in another country. D) A foreign corporation is the same thing as a multinational corporation.
78) Compared to the C corporation, the limited liability company is an attractive form of business ownership because
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A) even though it is a little more expensive to form, it has a longer life than the C corporation. B) a limited liability company permits one owner to own all the stock of the company, whereas a C corporation requires several owners. C) once formed, the limited liability company is a legal form of business ownership worldwide, whereas the C corporation must file for corporate status in each state and country it elects to do business. D) once formed, the limited liability company has fewer requirements, and has the option to avoid double taxation.
79)
Double taxation means
A) if stockholders decide to sell their shares, they are subject to paying twice the amount of taxes on any capital gains. B) as the owner of the company, you pay twice the amount in employment taxes on yourself, as you do on your employees. C) corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution. D) if the corporation doubles its profits from the previous year, the firm's tax rate (the percentage it pays in taxes) will also double.
80) According to the box, "How B Corps Help Society While Earning Profits," a benefit corporation is A) a mission-based company judged by how well it meets its own set of socially or environmentally beneficial goals. B) a nonprofit organization. C) a corporation without the possibility of double taxation because it's tax exempt. D) a special corporation type for crowdfunding sites.
81) Dave and Isabella own all Bella Corporation's stock. The stock of this corporation is not sold to the general public. Dave and Isabella own a(n)
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A) limited liability company. B) master limited partnership. C) alien corporation. D) closed corporation.
82) Bryant and Chase have considered creating their own company but are concerned about the possibility of losing all their personal assets if the business fails. One way for Bryant and Chase to avoid this risk would be to organize their firm as a A) general partnership. B) limited partnership. C) corporation. D) sole proprietorship.
83) Robin recently purchased 100 shares of stock in Champs Tennis Gear Inc. Robin is a(n)________ of this company. A) owner B) manager C) creditor D) partner
84) Henry is a stockholder in Vintage Amusements Inc., a C corporation that designs and manufactures merry-go-rounds. The company recently lost a major court decision and is being forced into bankruptcy. In fact, the damages being awarded are so large that, even if all company assets are sold and the proceeds are used to pay its debts, Vintage Amusements is likely to still owe money to its creditors. If Vintage Amusements goes bankrupt, Henry and the other stockholders will
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A) be personally responsible for all remaining debts. B) lose their investment but nothing else. C) be entitled to full reimbursement of any investment losses. D) automatically qualify for federal reimbursement for any losses suffered by the firm.
85) Oscar lives in Mexico City and is a Mexican citizen. He has several friends who are U.S. citizens and own shares in an S corporation. Oscar would like to invest in this company. Which statement is most accurate? A) Oscar can invest in this company, but must pay both U.S. and Mexican taxes. B) Oscar cannot become a shareholder since he is not a citizen or permanent resident of the United States. C) Oscar can become a shareholder but cannot become a manager, and his income must be paid in pesos. D) Oscar needs approval from the Mexican government before he can invest.
86) Although it is a small company, Delta Enterprises owns a large number of inexpensive rental housing units in Mississippi and Louisiana. Currently, the company is a chartered C corporation, but the owners are interested in switching to be an S corporation. After consulting a lawyer, they learned that Delta Enterprises does not qualify to be designated as an S corporation. Which characteristic of Delta Enterprises would prevent it from becoming an S corporation? A) The firm has fewer than 75 stockholders. B) The firm is chartered in one state, but owns property in another. C) The firm has only one class of stock, all owned by U.S. citizens. D) The firm receives more than 70% of its income from rents and other passive sources.
87) Bailey's dream is to open a chain of salons. She hopes to attract investors to help finance growth. Having once considered forming a C corporation, Bailey wants to have more flexibility about how the new business will be taxed. She also wants to offer investors/owners limited liability. Bailey can satisfy her objectives by setting up a(n)
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A) limited liability company. B) S corporation. C) alien corporation. D) general partnership.
88) Your three friends inherited an old dude ranch, and plan to turn it into a pasture for retired racehorses. Shady Rest wants to open its doors by next summer. After going to several small business seminars, your friends are certain they need limited liability. The high-risk, laborintensive business will require a sizeable investment including an air-conditioned barn, several fenced-in pastures, and loads of animal feed. You explain to them that LLC ownership requires owners to pay self-employment taxes on the entire amount of earnings. You are fairly certain this is one tax liability your friends would like to avoid. You instead recommend A) sole proprietorship. B) general partnership. C) a limited liability company. D) an S corporation.
89) Double taxation is experienced by corporations that pay dividends. Which scenario is an accurate example of double taxation? A) If Cyber Stellar Inc. distributes 20% of its net profit after taxes to its stockholders, these funds will be taxed again, when each individual stockholder claims his/her portion as earnings. B) By law, Cyber Stellar Inc. is permitted to tax its executive employees twice on their earnings, and then pass those funds on to its stockholders in the form of dividends. C) Due to the fact that it is a corporation, the accountants of Cyber Stellar Inc. calculate 35% of the company's earnings, multiply it by 2, and then distribute that amount to the federal government each year for taxes. D) If Cyber Stellar Inc. fails to pay its taxes on time during any given year, it must pay the current year and the delinquent year, in order to stay in business, similar to being taxed two times.
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90) Raj is a 37-year-old married businessman who runs a dry-cleaning business with three locations. He has many financial obligations: a home, the health care of his family, and his commitment toward saving for his three children's college educations. Raj knows that two of his locations require a large infusion of cash to pay for new and expensive dry-cleaning equipment. Although his wife's job provides the family with health insurance, it also places the family in a higher income tax bracket. Raj would certainly like to minimize his taxes. Which form of business ownership would you suggest for him? A) He should consider a sole proprietorship due to the fact that it pays its own taxes and it has limited liability. B) He should consider a sole proprietorship due to the fact that it has unlimited liability and it will protect the family's personal assets. C) He should consider a corporation because he can avoid the negative aspect of limited liability. Corporations are always taxed at a lower rate than individuals. D) He should consider a limited liability company because he will only be liable for what he has invested in the business. His personal assets will be protected, and he can be taxed like a sole proprietorship.
91)
One reason that companies participate in mergers and acquisitions is to A) maintain internal management control. B) convert a sole proprietorship into a partnership. C) expand within their own field or enter new markets. D) take the first step toward a joint venture.
92)
A __________ is two firms combining to form one company. A) joint tenancy B) franchise C) merger D) leveraged buyout
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93) A(n) __________ occurs when one company buys the property and obligations of another company. A) cooperative B) partnership C) leveraged buyout D) acquisition
94)
Three types of corporate mergers are A) economic, geographic, and strategic. B) vertical, horizontal, and conglomerate. C) flexible, differentiated, and conditional. D) explicit, implicit, and intrinsic.
95)
A __________ merger unites firms at different stages of related businesses. A) vertical B) horizontal C) diagonal D) conglomerate
96)
When two companies in the same industry agree to become one firm, the result is called a A) vertical merger. B) joint venture. C) monopoly. D) horizontal merger.
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97) When two companies in completely unrelated industries agree to become one firm, the result is called a A) vertical merger. B) joint venture. C) conglomerate merger. D) horizontal merger.
98)
A conglomerate merger will
A) diversify business operations and investments. B) allow the firm to have a less dominant position in its market. C) enable the firm to enjoy a higher degree of specialization. D) give the firm a more secure access to needed materials and components and better control over quality.
99)
One result of taking a firm private is A) the firm's stock is no longer available for purchase on the open market. B) managers lose some control as the number of stockholders increases. C) the public image of the firm will suffer. D) the firm will have access to more capital.
100) An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n) A) golden parachute. B) arbitrage agreement. C) factor transaction. D) leveraged buyout.
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101) If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as A) capitalizing. B) stock turning. C) turning the equity. D) taking the firm private.
102)
The difference between a merger and an acquisition is
A) a merger does not combine the assets and liabilities of firms, whereas an acquisition combines assets and liabilities. B) a merger combines the assets of the two firms, but each company continues to assume its own liabilities, whereas an acquisition is a total buyout of one firm by another. C) a merger is the joining of resources of two companies which now become one company, whereas an acquisition is a buyout of one firm by the other. D) a merger is always something smaller tagging onto something larger, like a merging lane onto an interstate, whereas an acquisition is two firms that are relatively the same size agreeing to continue as one, more like two major interstates that come together and travel as one for several miles.
103) When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a __________ merger. A) vertical B) horizontal C) linear D) conglomerate
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104) A merger involving a commercial bakery and a grocery retailer would be an example of a __________ merger. A) vertical B) horizontal C) linear D) conglomerate
105) A merger involving a software producer and a clothing manufacturer is an example of a __________ merger. A) vertical B) horizontal C) linear D) conglomerate
106)
In a leveraged buyout, the managers of a firm, its employees, or other investors A) move the company elsewhere and start over. B) obtain the assets of the company through bankruptcy proceedings. C) borrow funds to buy out the firm's stockholders. D) negotiate a merger with another firm to create a conglomerate.
107)
When investors successfully take a firm private, the company's stock is A) converted into bonds. B) converted into cash. C) no longer sold to investors on the open market. D) combined and controlled by a single stockholder.
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108) Metro Productions Inc. recently bought Entertainment World for an undisclosed amount of money. It now owns all of Entertainment World’s properties and obligations. This is an example of a(n) A) merger. B) combination. C) expropriation. D) acquisition.
109) Green Earth Foods, a specialty grocery store, is considering a conglomerate merger with a company that makes storage solutions. A likely reason is A) to expand its market share. B) to develop spin-off companies. C) diversification. D) to meet the requirements to convert to a limited liability company.
110) Charlie's Cookies Corporation purchased the Tasty Treats Cookie Company. Although this was initially an acquisition, the merging of these two businesses was a __________ merger. Charlie's Cookies went on to purchase several baking product companies. Joining forces with some of its suppliers would represent a __________ merger. A) conglomerate; horizontal B) vertical; horizontal C) horizontal; vertical D) conglomerate; conglomerate
111)
The strategy of investors who are attempting a leveraged buyout is to
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A) shape up the company for quick resale. B) use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves. C) secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock. D) use investment tax credits from the government to acquire all of the physical assets owned by the firm.
112) Foreign investment in U.S. companies continues to be strong. When Belgian-based InBev purchased the largest beer company in the United States, Anheuser-Busch, this action constituted a(n) __________ with a negotiated selling price of $52 billion. A) merger B) partnership C) acquisition D) unequivocal buy-in
113) Myles is a major stockholder in Expert Transmission Services (ETS), a nationwide network of transmission repair shops founded by his father. Currently, ETS stock is sold on the open market, but Myles has talked to several relatives about his desire to get all of the ETS stock back in his family's hands. Myles is interested in A) taking the firm private. B) a hostile takeover of the firm. C) converting the firm to a general partnership. D) forming a master limited partnership.
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114) Serenity Communications Inc., located in a remote area of Oregon, made a special device that was used in LTE phones. After three years of local operations, the company that employed 1,000 people was planning to close its Oregon operation and move the assembly offshore. Under the direction of a financial services company that financed the deal, the employees agreed to become owners of the company and continue to operate the business. The business concept that describes this arrangement is A) IPO (initial public offering). B) LBO (leveraged buyout). C) EPO (equity public offering). D) HM (horizontal merger).
115) A(n) __________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory. A) conditional grant B) franchise agreement C) trade contract D) extended ownership agreement
116) A(n) __________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory. A) intrapreneur B) franchisee C) limited partner D) franchisor
117) A person who buys the right to use a business name and sell a product within a given territory is called a
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A) stockholder. B) franchisee. C) limited franchisor. D) venture capitalist.
118)
A franchise can be formed A) only as a general partnership. B) only as a corporation. C) as either a corporation or partnership, but not as a sole proprietorship. D) as a corporation, partnership, or sole proprietorship.
119) The most popular types of business for franchising are gas stations with convenience stores and A) hair salons. B) restaurants. C) car dealerships. D) physical therapy services.
120) A __________ is the share of profits or percentage of sales a franchisee pays to a franchisor. A) royalty B) dividend C) premium D) co-pay
121)
What is an advantage of franchises?
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A) shared profit B) management regulation C) management and marketing assistance D) coattail effects
122) One reason franchises have become so popular is that this arrangement provides the franchisee with A) a nationally recognized name and product. B) a low-cost way to start a business. C) limited liability. D) the right to retain all profits earned by their franchise.
123)
Global franchising offers
A) few opportunities for American investors. B) opportunities for large franchise systems, but not small ones. C) opportunities for both large and small franchises. D) American firms the opportunity to market goods overseas without adjustment for cultural differences.
124)
Opening and operating a franchise in a different country A) is illegal according to the Clayton Antitrust Act. B) is no different than setting up a franchise in the domestic market. C) may require the owner to adapt to social and cultural differences. D) is much less risky than owning a domestically based franchise.
125)
Franchisors may send reverse royalties to franchisees who
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A) have not yet created their own website. B) feel their sales have been hurt by the franchisor's online sales. C) are using e-commerce to expand their sales territory. D) have limited financial success in their first year.
126) __________ is by far the most popular target for American franchisors seeking to establish franchises in other countries. A) Canada B) Mexico C) Great Britain D) Japan
127)
Franchised businesses are successful (both domestically and internationally) because A) they require little start-up revenue or expertise. B) people prefer dealing with the owners and employees of franchised businesses. C) laws require franchisors to provide identical service and support to all franchisees. D) customers like the predictability of the product and/or service.
128)
An evaluation of franchising would conclude that this type of arrangement
A) has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. B) appeals to people who want to own a business, but are not comfortable starting a company from scratch. C) has a much higher risk of failure than independent companies. D) has little appeal outside the United States.
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129) Which statement best summarizes the experience of U.S. franchisors in foreign countries? A) Very few U.S. franchisors of any size have had success in international markets. B) Large franchisors have had success in other nations, but newer and smaller franchisors have lacked the financial strength and reputation to succeed in global markets. C) The only nations in which U.S. franchisors have achieved any success are Great Britain and Mexico. D) Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.
130)
One important consideration when prospecting for a good franchise business is
A) the saturation rate of the franchise. The more saturation the better. B) the market potential for the product or service, at the prices you need to charge. C) the population level of the area where you will operate. Large populations are too overwhelming, often needlessly increasing demand. D) no restrictions on any franchisee's territory, to allow for future expansion.
131)
Which statement about buying a franchise is most accurate?
A) One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed. B) Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market. C) Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with no need for attorney review. D) Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business.
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132) The "Spotlight on Small Business" box explains how four friends came up with the idea for Stumpy's Hatchet House axe-throwing entertainment venues. Their initial success led to more than 30 Stumpy's operating across the country. Each additional venue pays a fee to Stumpy's for using its name and business ideas. Stumpy's is using __________to grow its business. A) franchising B) licensing C) co-ops D) acquisitions
133) Kiara is ready to become a franchise owner by opening a new Fire Bowl, a very successful fast food chain of 75 restaurants specializing in Thai cuisine. Which problem is Kiara most likely to encounter if she agrees to become a franchisee? A) high initial costs and fees B) poor name recognition and visibility C) lack of financing D) lack of managerial assistance
134) Tariq is a franchisee with a chain of regional hotdog shops. He was doing well until several other franchisees got in trouble over cleanliness issues and were forced to close their shops. Soon afterward, Tariq's business declined and was also forced to close. This is an example of A) an economic shakeout at work. B) the coattail effect. C) the law of diminishing returns. D) management by exception.
135) The Big Bite Inc. sells the rights to use its name and sell its signature sandwiches in a given market area to those willing to pay agreed-upon fees and meet specific contractual terms. The Big Bite is
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A) a franchisee. B) a franchisor. C) creating private subsidiary companies. D) offering a tax-free investment opportunity.
136) Lakeview Auto Experts Inc. sells franchises to prospective businesspersons who want to use the Lakeview Auto Experts name and offer its products. In a franchise arrangement, Lakeview Auto Experts would be the __________, and the buyer of the franchise is the __________. A) owner; limited partner B) co-signer; co-signee C) franchisor; franchisee D) franchisee; franchisor
137) June is investing in a home cleaning franchise. At her first interview with the franchisor's selling agent, she was told the parent company expects 5% royalties. What are royalties? A) the initial investment, also known as the franchise fee, paid to the franchisor B) the cost of supplies that she will purchase one time each month from the parent company C) the milestones that the parent company expects her to reach. With each milestone, she will be rewarded with commissions D) the share of the profits or a percentage share of revenues (net sales)
138) Tomasz, a prospective franchise owner, is looking to keep his monthly costs as low as possible. The franchisor he is checking out is advertising that royalty payments of 8% of sales could be as high as $300,000 per month. The franchisor is claiming that a franchisee can expect monthly sales to be as high as
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A) $3,125,000. B) $3,000,000. C) $3,750,000. D) $300,000.
139) Sawyer plans to open three Primo Pizza franchises in the greater Phoenix area. He tells you that he plans to negotiate with the franchisor to get rid of the giant chef-hat mascot that sits on the roof of all Primo Pizza restaurants. Sawyer is likely to learn that A) the parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs. B) he is making a smart decision because this is an unnecessary business expense. C) it is nonnegotiable due to company rules. D) his failure rate will not increase or decrease because franchises traditionally have low failure rates.
140) A __________ is an organization that is owned and controlled by the people who use it— producers, consumers, and workers with similar needs pool their resources for mutual gain. A) corporation B) limited partnership C) mutual fund D) cooperative
141) In rural areas, electrical power is often sold by __________ that take advantage of the government's policy to sell them electricity at wholesale rates. A) franchises B) limited partnerships C) individual consumers D) cooperatives
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142) Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties. A) franchises B) limited partnerships C) big box warehouse clubs D) cooperatives
143)
The purpose of a farm cooperative is to A) give members more economic power as a group than they would have as individuals. B) give each farm an equal share in the running of the cooperative. C) equalize the members' standard of living. D) allow socialism a foothold in the United States.
144)
In a cooperative, members/customers A) democratically control their businesses by electing a board of directors. B) are known as limited partners. C) each have unlimited liability for the debts of the firm. D) take turns serving on the board that manages the company.
145)
People who form cooperatives
A) believe the government should play a larger role in the economy. B) dislike the notion of having owners, managers, and customers as separate individuals with separate goals. C) see competitive behavior as the key to ensuring rapid economic growth. D) want to find a way to supply basic necessities free of charge to everyone.
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146)
A distinguishing feature of a cooperative is that it A) maintains a distinct separation between ownership and management. B) is only intended to operate for a limited period of time. C) is owned and operated by the people who use it. D) can have no more than 75 owners, all of whom must be citizens of the United States.
147)
Which statement about farm cooperatives is most accurate? A) Farm cooperatives have declined in importance in recent years. B) Farm cooperatives have become a major force in American agriculture. C) Farm cooperatives provide products and services strictly to their own members. D) Farm cooperatives have increased in number, but decreased in size in recent years.
148) Which individual would likely be most interested in participating in a business organized as a cooperative? A) Ethan is interested in the idea of combining his time and resources with others to operate a business providing a good or service that they all will use. B) Renee looks to be an owner of a business and share in its profits, but does not want to take an active role in managing the company or participating in its daily operations. C) Mauricio wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth. D) Isadora prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is.
149) Several small vineyard owners in the Napa Valley region of California banded together to market their grapes and wine in an attempt to get better prices. Over the years they expanded the organization to include other services such as buying and selling farm supplies and equipment and providing financial and technical services. The arrangement established by these vineyard owners is an example of a
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A) closed corporation. B) joint venture. C) limited agricultural partnership. D) farm cooperative.
150) Genna Raiter's passion has always been cars, cars, cars! As a teen, she would spend hours with her dad fixing the family car, and he taught her how to change the oil and make minor repairs. While still in high school, Genna got a job at a local garage. After high school graduation, she completed the auto mechanics degree at a local community college and quickly decided she wanted to be her own boss. She quit her job at her first garage, borrowed some money from her dad, and created her own repair shop, the Car Keepers Garage. Genna's hard work gradually attracted a loyal clientele of satisfied customers. Her success has her thinking about expanding and opening garages in two other locations, but she lacks the financial resources needed for development. Furthermore, the success of her business is forcing Genna to spend more time managing the business and less time doing the actual technical work she still enjoys. She wants to find business partners who can help her with management and provide additional financial resources. She has approached a couple of friends she met in high school, Al Ternator and Lou Banfilter, to see if they would like to join the business.
150.1)
Right now, Car Keepers Garage is operated as a
A) limited liability company. B) cooperative. C) sole proprietorship. D) solitary subsidiary.
150.2) Genna approached Al Ternator about joining the business as an owner. She offered to provide the technical expertise and deal directly with customers, while Al, who has a degree in finance, takes care of the financial side of running Car Keepers. In addition, Genna wants Al to contribute some much-needed money for expansion. Under Genna's proposal, she and Al would operate the business together as
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A) limited partners. B) general partners. C) majority shareholders. D) business consultants.
150.3) Although Lou Banfilter, now a young attorney, is impressed with Car Keepers and believes it could be a good investment, he told Genna that his professional position at a law firm prevents him from taking an active role in the business. He is also concerned about accepting more risk since he and his wife are expecting a child. He mentioned a preference for limited liability. If Lou joined Genna and Al, the three might consider forming a A) limited partnership. B) general partnership. C) sole proprietorship. D) master limited partnership.
150.4) When Genna confided in Lou and Al that she too was concerned about adding additional risk, Lou suggested that they explore the possibility of a different type of business ownership, a(n) ________, which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk. A) alien corporation B) master limited partnership C) limited partnership D) limited liability company
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150.5) Al also suggested another way Genna could finance her expansion. He described setting up a chain of Car Keepers Garages by selling the rights to use the Car Keepers' name, business model, garage design, and service ideas to others who would like to own a similar shop. These individuals would pay Car Keepers an initial fee and monthly royalties based on earnings. Al is suggesting that Genna set up a A) joint venture. B) franchise arrangement. C) C corporation. D) master limited partnership.
151)
Partnerships are the most common form of business ownership. ⊚ true ⊚ false
152) The three major forms of business ownership in the United States are sole proprietorships, partnerships, and corporations. ⊚ true ⊚ false
153)
Few people today start their own business. ⊚ true ⊚ false
154) Once a business is established, it's almost impossible to change from one form of business ownership to another. ⊚ true ⊚ false
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155) When two or more people legally agree to become co-owners of a business, the form of business is called a partnership. ⊚ true ⊚ false
156) A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship. ⊚ true ⊚ false
157) Corporations represent 20% of all the businesses in the United States and earn over 80% of the total U.S. business receipts. ⊚ true ⊚ false
158) A comparison of the three major forms of business ownership shows that sole proprietorships are usually the most difficult type of business to establish. ⊚ true ⊚ false
159) The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government. ⊚ true ⊚ false
160)
It is usually easy to start and end a sole proprietorship. ⊚ true ⊚ false
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161)
The profits of a sole proprietorship are taxed as the personal income of the owner. ⊚ true ⊚ false
162) The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management. ⊚ true ⊚ false
163) A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business. ⊚ true ⊚ false
164) One of the strengths of the sole proprietorship is its ability to sustain rapid growth by quickly raising large amounts of financial resources. ⊚ true ⊚ false
165) The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business. ⊚ true ⊚ false
166) A drawback of sole proprietorships is that they usually have limited access to additional financial resources.
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⊚ ⊚
true false
167) An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities. ⊚ true ⊚ false
168) If a sole proprietorship fails, the owner may lose whatever was invested in the business, and the owner's personal assets are also at risk. ⊚ true ⊚ false
169) If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate. ⊚ true ⊚ false
170) Sole proprietors sometimes have trouble competing with large firms for expert talent. Large firms can usually pay better and offer benefits that are unaffordable to the sole proprietor. ⊚ true ⊚ false
171) Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they don't need to worry about a court requiring them to sell off personal assets to pay for the debts of the firm. ⊚ true ⊚ false
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172) Attracted to the idea of being his own boss, Jermaine wants to start a new business. He is confident in his abilities, and knows his potential market is strong, so he is not particularly worried about the financial risks. All of these factors suggest that Jermaine may favor starting his business as a sole proprietorship. ⊚ true ⊚ false
173) Madelyn is a talented designer who wants to start her own men's accessories line. But first, she is trying to decide which form of business ownership is right for her. As a young mom who hopes to send her children to college in the future, she does not want to jeopardize her savings in any way. In order to overcome these risks, Madelyn should start her business as a sole proprietorship. ⊚ true ⊚ false
174) Patrice is convinced she has the best idea for a new business. Unfortunately, her business would require a high initial investment and Patrice has poor credit and little personal wealth. She would be unlikely to find success if she organized her business as a sole proprietorship. ⊚ true ⊚ false
175)
A general partner takes an active role in the management of the business. ⊚ true ⊚ false
176)
All partners in a general partnership have limited liability for the debts of their firm. ⊚ true ⊚ false
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177) In a general partnership, all partners share in management of the business and in the liability for the firm's debts. ⊚ true ⊚ false
178)
In a general partnership, all partners are entitled to an equal share of the firm's profits. ⊚ true ⊚ false
179) Limited partnerships are just like general partnerships, except that the owners are partners for a limited time period. ⊚ true ⊚ false
180) A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested. ⊚ true ⊚ false
181) A limited partnership consists of one or more general partners and one or more limited partners. ⊚ true ⊚ false
182) Although shares of master limited partnerships can be purchased on one of the national stock exchanges, these companies are taxed like partnerships.
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⊚ ⊚
183)
true false
The Uniform Partnership Act is law in every state. ⊚ true ⊚ false
184) According to the Uniform Partnership Act, the three key elements of any general partnership are (1) common ownership, (2) shared profits and losses, and (3) the right to participate in managing the operations of the business. ⊚ true ⊚ false
185)
Partnerships are more likely to fail than sole proprietorships. ⊚ true ⊚ false
186) A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision. ⊚ true ⊚ false
187)
One of the major disadvantages of a partnership is that profits must be divided equally. ⊚ true ⊚ false
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188) A general partner has unlimited liability for the debts of the partnership only if he or she personally approved the decisions that resulted in those debts. ⊚ true ⊚ false
189) In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing. ⊚ true ⊚ false
190) One advantage of a partnership is that there is a simple process for partners to terminate their business. ⊚ true ⊚ false
191) Compared to sole proprietorships, an advantage of partnerships is their ability to obtain more financial resources. ⊚ true ⊚ false
192) Setting up a partnership under the terms of a written agreement is a bad idea because written agreements tend to be too inflexible and impersonal. ⊚ true ⊚ false
193) Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge. ⊚ true ⊚ false
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194) A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project. ⊚ true ⊚ false
195) In a limited partnership, the general partners should encourage the limited partners to take a more active role in the operations of the business. After all, the limited partner has comparable liability in the business, even though they may not be a partner for as long a period of time as the general partners. ⊚ true ⊚ false
196) Because of their expertise, law firms seldom have difficulty terminating partnership agreements. ⊚ true ⊚ false
197) The authors suggest that potential partners discuss the types of skills that each brings to the business. Partners with complementary skills may enhance the business. ⊚ true ⊚ false
198) One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement. ⊚ true ⊚ false
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199) Attributes such as trust and integrity are not something you should get overly concerned about when selecting partners. This is a business decision, not a friendly game of golf. ⊚ true ⊚ false
200) The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets one-third of any accumulated profits. ⊚ true ⊚ false
201) For 11 years, Maria and Charles have owned a car detailing business as partners. Now they would like their younger brother to join them. Unfortunately, partnership law states that only two partners can participate in a partnership. ⊚ true ⊚ false
202) Carlos is a general partner in a local bakery. All of his personal assets are legally protected from the debts of the business. ⊚ true ⊚ false
203) When two of Claudine's friends approach her about starting a business, she indicates she does not want to risk any amount beyond her initial investment or be involved with the day-today management. However, she wants to invest in the business. Claudine's preferences suggest that she prefers a general partnership form of business ownership. ⊚ true ⊚ false
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204) Kelly and her friend Ezra formed a partnership in a landscape business. Under their arrangement, Kelly actively manages the company and assumes unlimited liability for its debts. Ezra invests several thousand dollars with plans to share in the profits, but does not actively make management decisions, nor will he assume liability beyond his initial investment. Kelly and Ezra are in a limited partnership. ⊚ true ⊚ false
205) Jason has agreed to become a partner in his cousin's commercial cleaning business. Since he provided 30% of the money to start the company and developed its website, he is entitled to 30% of any profits the company earns during its first year of operation. ⊚ true ⊚ false
206) Kris and his friend Sam created a general partnership to import emu from Australia to the United States. After a year, Kris found himself at the mercy of Sam, who seemed to keep the books and seldom shares the financial results, even though Kris was the firm's best and only salesperson. As their consultant, one of the first things that you inquire about is whether they are familiar with the UPA (Uniform Partnership Act), specifically the right to participate in managing the operations of the business. ⊚ true ⊚ false
207) Jax is a limited partner in an online clothing company. As a limited partner, Jax can be involved with the company for a maximum of five years. ⊚ true ⊚ false
208) A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners. ⊚ true ⊚ false
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209)
In today's economy, only large business enterprises should operate as corporations. ⊚ true ⊚ false
210)
The owners of a corporation are known as general corporate partners. ⊚ true ⊚ false
211)
A corporation can raise financial capital by selling shares of stock to interested investors. ⊚ true ⊚ false
212)
Stockholders in a corporation accept unlimited liability for the corporation's debts. ⊚ true ⊚ false
213) A disadvantage of corporations is that it is time-consuming and difficult to change ownership. ⊚ true ⊚ false
214)
When one of the owners of a corporation dies, the corporation legally ceases to exist. ⊚ true ⊚ false
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215)
Corporations are easy to start and easy to terminate. ⊚ true ⊚ false
216)
A disadvantage of corporations is that they generally require extensive paperwork. ⊚ true ⊚ false
217) A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor. ⊚ true ⊚ false
218) Stockholders in a corporation normally exert a significant degree of control over the company's daily operations. ⊚ true ⊚ false
219) The stockholders in a corporation elect a board of directors to oversee the company's major policy issues. ⊚ true ⊚ false
220)
Stockholders in a corporation have limited liability. ⊚ true ⊚ false
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221) Stockholders in a corporation entrust control over the company's daily operations to managers selected by the board of directors to run the company. ⊚ true ⊚ false
222) One advantage of corporations is that the initial cost of organization is usually lower than for other forms of business ownership. ⊚ true ⊚ false
223)
States may levy special taxes on corporations that are not imposed on other businesses. ⊚ true ⊚ false
224) The guiding principles of benefit corporations discussed in the "Adapting to Change" box reveal that their owners put profit before all other considerations. ⊚ true ⊚ false
225)
Most states have legal restrictions that prevent individuals from incorporating. ⊚ true ⊚ false
226)
One reason individuals incorporate is to obtain limited liability advantages. ⊚ true ⊚ false
227)
An alien corporation does business abroad but is chartered in the United States.
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⊚ ⊚
true false
228)
A domestic corporation does business in the state in which it is chartered. ⊚ true ⊚ false
229)
A foreign corporation is chartered in a country outside the United States. ⊚ true ⊚ false
230) Delaware is a popular state in which to seek incorporation because its business-oriented laws make the process easier than it is in other states. ⊚ true ⊚ false
231) A closed corporation is one whose stock is held by a few people and is not available to the general public. ⊚ true ⊚ false
232)
A nonprofit corporation does not seek personal profit for its owners. ⊚ true ⊚ false
233) A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public.
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⊚ ⊚
true false
234)
A multinational corporation is a firm that operates in several countries. ⊚ true ⊚ false
235)
To change ownership in a corporation you simply sell your stock to someone else. ⊚ true ⊚ false
236)
Stock options are the right to purchase shares of the corporation for a fixed price. ⊚ true ⊚ false
237) An advantage of corporations is their ability to attract talented staff by offering stock options and other employee benefits. ⊚ true ⊚ false
238)
It is said that corporations have perpetual life. ⊚ true ⊚ false
239) One advantage of an S corporation is that the profits are distributed to the owners and taxed as each owner's personal income, thus avoiding the problem of double taxation.
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⊚ ⊚
true false
240) By filling out the correct paperwork annually, any corporation can qualify to be classified as an S corporation. ⊚ true ⊚ false
241) A company that loses its status as an S corporation may not reelect this status for at least 5 years. ⊚ true ⊚ false
242)
An S corporation has fewer ownership rules than a limited liability company. ⊚ true ⊚ false
243) A limited liability company is similar to an S corporation, but without the special eligibility requirements. ⊚ true ⊚ false
244) Limited liability companies have both flexibility in tax treatment of earnings and limited liability protection for owners. ⊚ true ⊚ false
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245) One of the drawbacks of a limited liability company is that most states do not yet recognize this form of ownership. ⊚ true ⊚ false
246) Like stockholders of a C corporation, owners of a limited liability company (LLC) are free to sell their ownership without the approval of other members. ⊚ true ⊚ false
247)
The limited liability company requires a minimum of 10 members. ⊚ true ⊚ false
248) The S corporation form of business would be particularly attractive to fast-growing companies that want to attract thousands of new stockholders. ⊚ true ⊚ false
249) The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations. ⊚ true ⊚ false
250)
Public utilities, like electricity and water, are examples of quasi-public corporations. ⊚ true ⊚ false
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251) In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case. ⊚ true ⊚ false
252) If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares. ⊚ true ⊚ false
253) The stockholders of large, publicly traded corporations are intricately involved with the daily operation of the business. ⊚ true ⊚ false
254) If a corporation distributes after-tax profits to its stockholders in the form of dividends, the government considers these distributions as part of each stockholder's personal income. Stockholders pay taxes on these distributions. ⊚ true ⊚ false
255) If a corporation has after-tax profits of $360,000, and elects to distribute this amount in the form of dividends to its stockholders, these distributions are free and clear of taxes because the corporation paid taxes on this amount prior to distribution. ⊚ true ⊚ false
256) Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.
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⊚ ⊚
true false
257) The major differences between an S corporation and a limited liability company are limits on the number of owners and the citizenship status of individuals who are owners. ⊚ true ⊚ false
258) The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company. ⊚ true ⊚ false
259) Three physicians want to incorporate their practice. There is no advantage due to the costs involved. ⊚ true ⊚ false
260) Sweet Bites is a small chain of cupcake shops owned and operated by eight partners. The owners think that their chain has the potential for rapid growth. However, several of the partners are concerned about the growing financial risks that will accompany this growth. One way the partners could deal with this problem would be to incorporate their business. ⊚ true ⊚ false
261) Lars recently invented a new workout program that uses indoor surfboards. His equipment can simulate surfing on waves and is a new favorite core workout in his community. As the founder of a fast-growing business, you think his goal of incorporating, "to remain in steadfast control of the firm's operations for an indefinite number of years," is good strategy.
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⊚ ⊚
true false
262) Timber Homestead is a conventional corporation with 516 stockholders. A number of the stockholders are citizens of Canada and others are citizens of Mexico, though most are U.S. citizens. Due to its size and diversity in ownership, you would recommend that Timber Homestead change to an S corporation. ⊚ true ⊚ false
263) The owners of Waterproofing Solutions are looking to become an S corporation. Unfortunately, after speaking with their lawyer, she advised them that they do not meet some of the requirements necessary to qualify as an S corporation. An alternative form of business that would give them similar advantages is a limited liability company. ⊚ true ⊚ false
264) The ownership of Designer Pets, a small company that designs and manufactures clothing and costumes for dogs, wants to organize as an LLC. All the owners are under 40 and two are expecting children by the end of the year. This is good strategy because each member can choose to commit to limited or unlimited liability. ⊚ true ⊚ false
265) Two of your friends are horse fanatics who inherited several acres of land that they turned into a retirement sanctuary for racehorses. Quiet Acres Stables was originally incorporated as a limited liability company. Now the members are reevaluating this form of ownership. Unlike an S corporation, they now pay self-employment taxes on all company profits—not just on the salaries they pay themselves. ⊚ true ⊚ false
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266) After a fruitful first five years, Quiet Acres Stables LLC (a retirement ranch for racehorses) thinks it may be able to attract donations from animal advocate groups and even the federal government if it becomes a nonprofit corporation. As its business advisor, you explain that as a nonprofit corporation, the owner(s) may earn a salary but the business should not seek after-tax profits. ⊚ true ⊚ false
267) Green Mist Golf Resort has the opportunity to buy 1,000 acres of property adjacent to its award-winning 18-hole golf course. After talking with her banker and her lawyer, the owner is encouraged to begin the paperwork to change from a limited liability company form of business ownership to a corporation. You applaud this strategy because she will eliminate the problem of double taxation. ⊚ true ⊚ false
268)
When two firms join together to form one company, it is called a merger. ⊚ true ⊚ false
269)
The three major types of mergers are acquisition, joint, and connective. ⊚ true ⊚ false
270) An acquisition is when one company buys the property and obligations of another company. ⊚ true ⊚ false
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271) Taking a firm private involves converting a firm from a corporation to a general partnership. ⊚ true ⊚ false
272) If firms wish to gain market share in their current market, they would consider a conglomerate merger. ⊚ true ⊚ false
273)
The purpose of a conglomerate merger is to diversify operations and investments. ⊚ true ⊚ false
274) A merger between two businesses in different stages of related businesses is known as a vertical merger. ⊚ true ⊚ false
275) A horizontal merger refers to a merger between two companies that serve entirely different markets. ⊚ true ⊚ false
276) A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.
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⊚ ⊚
true false
277) A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock. ⊚ true ⊚ false
278) When a group of investors take a firm private, they purchase all the company's outstanding stock. ⊚ true ⊚ false
279) In recent years, foreign firms have avoided merging with or acquiring American corporations. ⊚ true ⊚ false
280) A merger is a mutual agreement where companies join together, whereas an acquisition is when one firm purchases the assets and obligations of another firm. ⊚ true ⊚ false
281) One reason that a firm would choose to merge or acquire another company would be to gain market share. ⊚ true ⊚ false
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282) One reason that a firm may choose to merge with or acquire another company would be to diversify products or services. ⊚ true ⊚ false
283)
The strategy of a leveraged buyout is used when employee talent is at a minimum. ⊚ true ⊚ false
284) Taking a company private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover. ⊚ true ⊚ false
285) A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of borrowing. ⊚ true ⊚ false
286) Shady Valley Golf Club just announced plans to purchase the property and assume the obligations of Arnie's Golf Resort, one of its major competitors. Shady Valley Golf Club's plans are an example of a merger. ⊚ true ⊚ false
287) Two long-time competitors in the grocery industry recently issued an announcement stating their decision to merge. The statement claimed that the new company would have more financial resources, which would enable it to expand services and broaden offerings to customers. This proposed merger is an example of a horizontal merger.
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⊚ ⊚
true false
288) A large manufacturer of laptops is considering a merger with a leading producer of microprocessors and other computer chips. The laptop manufacturer believes such a merger would give it a guaranteed source of needed components, and enable it to have better control over quality. If this merger occurs, it would be an example of a horizontal merger. ⊚ true ⊚ false
289) Shirley is leading a group of stockholders who want to take Innovation Industries private. If Shirley's group succeeds, Innovation's stock will no longer be available to investors on the open market. ⊚ true ⊚ false
290) Due to several years of poor performance, Bradley Manufacturers Inc. plans to close. By borrowing the necessary amount, Bradley's workers can purchase the company's stock from current shareholders in a leveraged buyout, thus saving their jobs and working toward profitability. ⊚ true ⊚ false
291) A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee. ⊚ true ⊚ false
292)
A franchise may be organized as a sole proprietorship, partnership, or corporation.
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⊚ ⊚
true false
293) Franchisees are not always pleased with management regulations handed down from the franchisor. In some cases, franchisees have been known to band together to express concern over marketing and management direction. ⊚ true ⊚ false
294) Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own. ⊚ true ⊚ false
295)
One of the most popular businesses for franchising are restaurants. ⊚ true ⊚ false
296)
In a franchise arrangement, ownership remains in the hands of the franchisor. ⊚ true ⊚ false
297) One of the major advantages for the franchisee is instant business name recognition and important management assistance from the franchisor. ⊚ true ⊚ false
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298) Franchisees must follow more rules, regulations, and procedures than if they operated independently owned businesses. ⊚ true ⊚ false
299)
The coattail effect refers to the burden of corporate rules and regulations on franchisees. ⊚ true ⊚ false
300) The coattail effect refers to inevitable repercussions on your business if fellow franchisees should fail. ⊚ true ⊚ false
301) One drawback of franchises is that they have a higher failure rate than other types of business ventures. ⊚ true ⊚ false
302) The franchisee pays the franchisor a share of profits or a percentage commission on sales, known as a royalty. ⊚ true ⊚ false
303) Many franchisors have rules that prohibit franchisees from sponsoring their own websites. ⊚ true ⊚ false
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304) Because of the growth of minority-owned businesses in the United States, franchisors are becoming more focused on recruiting minority franchisees. ⊚ true ⊚ false
305)
It is impossible to run a franchise completely from home. ⊚ true ⊚ false
306)
Franchising is popular in the United States, but has little appeal in foreign countries. ⊚ true ⊚ false
307) Franchising in global markets has demonstrated that adapting some products to other markets can be challenging. ⊚ true ⊚ false
308) Franchisors sometimes pay reverse royalties to franchisees if it is evident that the franchisor's Internet sales have negatively impacted the profits of traditional bricks-and-mortar franchisee businesses. ⊚ true ⊚ false
309) In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement.
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⊚ ⊚
true false
310) Although franchise arrangements are a good source of income for the franchisee, these businesses do not contribute significantly toward job creation. ⊚ true ⊚ false
311) It is correct to say that if a franchisor expects an 8% royalty fee on revenue, the franchisor earns 8 cents on each dollar of revenue the franchisee generates. ⊚ true ⊚ false
312) The financial advantage to the parent company (the franchisor) in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful. ⊚ true ⊚ false
313) If a firm is advertising that it is selling franchise opportunities, the prospective franchisee can be assured that the government has performed due diligence on this company, and has deemed it a safe investment. ⊚ true ⊚ false
314) If a franchisee decides he wants out of the business, he is free to close up shop or sell the business, just as if he were a sole proprietor or partnership outside of a franchise arrangement. ⊚ true ⊚ false
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315) If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation. ⊚ true ⊚ false
316) Jake wants to be his own boss and run his own business. His friend suggests that an inexpensive way to get started is to buy a franchise. More importantly, Jake can limit his risk and have the freedom to run the business exactly as he wants. After reading this chapter, you concur with this advice. ⊚ true ⊚ false
317) Hollis paid a substantial franchise fee to obtain a portrait studio franchise in Lexington, Kentucky. With the franchise fee behind her, Hollis can use her creative talents to make her studio different and more attractive than other locations in the Lexington area. ⊚ true ⊚ false
318) Emile owns a small tax preparation franchise. As a franchisee, Emile is guaranteed the right to retain all of his franchise's revenues and profits. ⊚ true ⊚ false
319) Neely, a franchisee, runs a chain of small restaurants with a well-known name. Due to her hard work and people skills, her locations are doing quite well. She has noticed that several other franchisees in the same franchise system have let their restaurants deteriorate, especially in terms of lack of upgrades. Neely should be concerned about this trend since it eventually could affect her own business.
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⊚ ⊚
true false
320) A well-known franchised food chain was brought to its knees when several customers got sick from tainted beef. Although the food chain recovered due to its quick and consistent action, several franchisees sued the parent company for loss of sales. The franchisees experienced the coattail effects of the bad publicity this event received. ⊚ true ⊚ false
321) Sergey inherited a Home Realty franchise from his mother. Sergey is not a licensed agent or broker, nor does he know the first thing about the real estate business. He plans to sell his franchise to a friend who recently got his real estate license. One advantage of owning a franchise is that you can decide to sell out to anyone you think is suitable for the business. ⊚ true ⊚ false
322) Your friend Drew called to tell you he attended a pitch for a new franchise in website development. Drew says, "We can get in for a few thousand dollars." He wants to know if you are ready to invest too. Although both of you lack expertise in graphic design or programming, this should be a safe investment since it is already advertised as a franchise system. It's probably too good to pass up. ⊚ true ⊚ false
323)
A cooperative is simply another name for a corporation. ⊚ true ⊚ false
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324) gain.
A cooperative consists of people with similar needs who pool their resources for mutual ⊚ ⊚
true false
325) It is not unusual for members of cooperatives to work for and help manage their cooperative. ⊚ true ⊚ false
326) Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals. ⊚ true ⊚ false
327) The companies Ace Hardware, Blue Diamond, and Sunkist Growers are well-known cooperatives. ⊚ true ⊚ false
328) A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations. ⊚ true ⊚ false
329) At one time there were many farm cooperatives, but more recently other forms of business ownership have replaced them. ⊚ true ⊚ false
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330) Originally, farm cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things. ⊚ true ⊚ false
331) Sofia belongs to a food cooperative in her community. As a member, she can expect to have a vote in the election of the cooperative's board of directors. ⊚ true ⊚ false
332) Lilly has always disliked the concept that the customers, managers, and workers of a business are separate individuals with competing goals. She joined with many others in her community who share this view to become a member, and part owner, of a childcare center. Lilly and the other members operate the center for their own benefit, and each is expected to work at the center at least 12 hours each month. The type of organization Lilly belongs to is known as a joint venture. ⊚ true ⊚ false
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Answer Key Test name: chapter 5 7) D 8) C 9) A 10) D 11) A 12) B 13) C 14) C 15) B 16) C 17) A 18) A 19) A 20) A 21) B 22) B 23) C 24) C 25) B 26) A 27) C 28) B 29) D 30) B 31) C 32) B
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33) B 34) C 35) D 36) A 37) B 38) C 39) B 40) D 41) C 42) D 43) B 44) C 45) D 46) C 47) C 48) C 49) B 50) A 51) B 52) D 53) B 54) B 55) D 56) A 57) C 58) D 59) A 60) D 61) B 62) C
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63) A 64) A 65) D 66) C 67) B 68) A 69) C 70) B 71) A 72) A 73) D 74) C 75) A 76) B 77) A 78) D 79) C 80) A 81) D 82) C 83) A 84) B 85) B 86) D 87) A 88) D 89) A 90) D 91) C 92) C
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93) D 94) B 95) A 96) D 97) C 98) A 99) A 100) D 101) D 102) C 103) D 104) A 105) D 106) C 107) C 108) D 109) C 110) C 111) B 112) C 113) A 114) B 115) B 116) D 117) B 118) D 119) B 120) A 121) C 122) A
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123) C 124) C 125) B 126) A 127) D 128) B 129) D 130) B 131) B 132) A 133) A 134) B 135) B 136) C 137) D 138) C 139) C 140) D 141) D 142) D 143) A 144) A 145) B 146) C 147) B 148) A 149) D 150) Section Break 150.1) C 150.2) B
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150.3) A 150.4) D 150.5) B 151) FALSE 152) TRUE 153) FALSE 154) FALSE 155) TRUE 156) FALSE 157) TRUE 158) FALSE 159) FALSE 160) TRUE 161) TRUE 162) FALSE 163) FALSE 164) FALSE 165) TRUE 166) TRUE 167) FALSE 168) TRUE 169) TRUE 170) TRUE 171) FALSE 172) TRUE 173) FALSE 174) TRUE 175) TRUE 176) FALSE 177) TRUE
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178) FALSE 179) FALSE 180) TRUE 181) TRUE 182) TRUE 183) FALSE 184) TRUE 185) FALSE 186) TRUE 187) FALSE 188) FALSE 189) TRUE 190) FALSE 191) TRUE 192) FALSE 193) TRUE 194) FALSE 195) FALSE 196) FALSE 197) TRUE 198) TRUE 199) FALSE 200) FALSE 201) FALSE 202) FALSE 203) FALSE 204) TRUE 205) FALSE 206) TRUE 207) FALSE
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208) TRUE 209) FALSE 210) FALSE 211) TRUE 212) FALSE 213) FALSE 214) FALSE 215) FALSE 216) TRUE 217) FALSE 218) FALSE 219) TRUE 220) TRUE 221) TRUE 222) FALSE 223) TRUE 224) FALSE 225) FALSE 226) TRUE 227) FALSE 228) TRUE 229) FALSE 230) TRUE 231) TRUE 232) TRUE 233) TRUE 234) TRUE 235) TRUE 236) TRUE 237) TRUE
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238) TRUE 239) TRUE 240) FALSE 241) TRUE 242) FALSE 243) TRUE 244) TRUE 245) FALSE 246) FALSE 247) FALSE 248) FALSE 249) FALSE 250) TRUE 251) FALSE 252) TRUE 253) FALSE 254) TRUE 255) FALSE 256) FALSE 257) TRUE 258) TRUE 259) FALSE 260) TRUE 261) FALSE 262) FALSE 263) TRUE 264) FALSE 265) TRUE 266) TRUE 267) FALSE
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268) TRUE 269) FALSE 270) TRUE 271) FALSE 272) FALSE 273) TRUE 274) TRUE 275) FALSE 276) TRUE 277) FALSE 278) TRUE 279) FALSE 280) TRUE 281) TRUE 282) TRUE 283) FALSE 284) FALSE 285) FALSE 286) FALSE 287) TRUE 288) FALSE 289) TRUE 290) TRUE 291) TRUE 292) TRUE 293) TRUE 294) FALSE 295) TRUE 296) FALSE 297) TRUE
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298) TRUE 299) FALSE 300) TRUE 301) FALSE 302) TRUE 303) TRUE 304) TRUE 305) FALSE 306) FALSE 307) TRUE 308) TRUE 309) FALSE 310) FALSE 311) TRUE 312) TRUE 313) FALSE 314) FALSE 315) TRUE 316) FALSE 317) FALSE 318) FALSE 319) TRUE 320) TRUE 321) FALSE 322) FALSE 323) FALSE 324) TRUE 325) TRUE 326) TRUE 327) TRUE
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328) FALSE 329) FALSE 330) TRUE 331) TRUE 332) FALSE Student name:__________ 1) Not everyone dreams of owning their own business. Identify and describe at least three attributes of successful entrepreneurs.
2) What is an entrepreneurial team? What benefits does a team offer compared to an individual entrepreneur?
3)
List and discuss at least three causes of small business failure.
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4) Discuss the benefits exporting offers to small businesses. Given these benefits, why don't more small firms sell in international markets?
5)
Discuss several ways the Small Business Administration assists entrepreneurs.
6)
Entrepreneurship is A) managing businesses for others. B) a controlling interest in the ownership of a corporation. C) managing businesses that operate in multiple countries. D) accepting the risk of starting and running a business.
7)
Which U.S. issue does entrepreneurship most directly affect? A) the political process B) the ability to create jobs for others C) contributions of money to organizations that help people in need D) the ability to influence national macroeconomics polices
8)
What best describes why individuals accept the risks of business ownership?
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A) the potential for learning how to be self-disciplined B) the sense of creativity and independence C) the need for structure D) the desire to work fewer hours
9)
What is a characteristic of successful entrepreneurs? A) power-seeking B) relies heavily on others who believe in the business C) willingness and desire to follow others D) action-oriented
10)
What description best reflects entrepreneurial personality traits? A) tolerant of uncertainty and highly energetic B) risk averse and self-nurturing C) appreciative of direction from others and risk averse D) preference for working fewer hours and letting others do the footwork
11) A(n) __________ is a group of experienced professionals from different areas of business who join together to develop, make, and market a new product. A) entrepreneurial team B) joint venture C) self-directed functional team D) managerial task force
12)
An entrepreneurial team consists of
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A) managers with similar skills, abilities, and interests. B) experienced professionals from different areas of business. C) a group of wealthy investors who share a vision for a product. D) representatives from management, labor, and the government who work together to solve a company's problems in a creative way.
13)
Business owners who prefer to maintain their businesses at a manageable size are called A) macropreneurs. B) intrapreneurs. C) micropreneurs. D) home workers.
14)
One of the challenges of running a home-based business is A) an increase in business risk. B) managing the extra time on your hands. C) keeping work and family tasks separate. D) increasingly burdensome tax laws.
15) A creative person working within a corporation to launch new products and generate new profits is known as a(n) A) arbitrator. B) micropreneur. C) macropreneur. D) intrapreneur.
16)
The goal of an intrapreneur is to
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A) improve quality control in a corporation's production process. B) develop new products and generate new profits for the corporation. C) implement cost control policies for existing products. D) create smaller companies within larger companies.
17)
The U.S. government's Immigration Act of 1990
A) encouraged entrepreneurs to come to the United States through "investor visas." B) established a government program to teach U.S. workers displaced by immigration how to start their own businesses. C) established guidelines to help entrepreneurs recruit legal aliens as a source of lowcost labor. D) proposed an exchange program for U.S. and European entrepreneurs to temporarily live internationally in order to open up foreign branches for their businesses.
18)
Enterprise zones are specific geographic areas that
A) the government has set aside for major corporations that promise to spend at least $10 million to create new jobs. B) attract business investment by offering lower taxes and government support for development. C) are nationally recognized as having the fastest growth rates in the country. D) are characterized by government ownership of small businesses.
19)
Business incubators are usually government-funded facilities intended to A) provide health care benefits for small business owners and their families. B) offer start-up firms low-cost office space and basic business services. C) help rebuild the nation's infrastructure. D) assist foreign investors in identifying business opportunities in the United States.
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20)
Historically, entrepreneurs in the United States A) created wealth for themselves, but have had a minor impact on the economy as a
whole. B) started many small firms that later became major corporations employing thousands of workers. C) experienced success only when they worked in partnership with the federal government. D) played almost no role in creating jobs and wealth.
21) Which statement explains one of the reasons that people in the United States take the entrepreneurial challenge? A) It's all about profits, and the chance to make a lot of money. B) It's about independence and the opportunity to share in the American dream. C) It's about power and fame. D) It's about a lot of things, but it does not include personal achievement.
22)
Successful entrepreneurs are self-nurturing. This means they A) look to others for strength and encouragement. B) self-finance their business with no assistance from others. C) perform all business operations by themselves. D) believe in themselves and their ideas.
23)
Which statement is characteristic of entrepreneurs?
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A) They like certainty. B) They have the ability to visualize a clear path. C) They look at problems and see opportunities. D) They prefer to be inventive rather than worry about whether the invention solves a customer need.
24)
Although successful entrepreneurs are more tolerant of uncertainty, they A) seldom start another business after a failure. B) only allow themselves a short time frame to succeed. C) always protect themselves from failure by taking out lots of insurance. D) strive to take calculated risks.
25)
Effective entrepreneurial teams combine A) creativity with marketing and production experience. B) venture financing, tax benefits, and production economies. C) scientific abilities, capital investment, and marketing skills. D) risk tolerance, debt financing, and international experience.
26)
What characterizes successful entrepreneurial teams? A) They quickly organize themselves like large corporations. B) They assign only one person to new product innovation. C) They bring a variety of talent to the business venture. D) They outsource most of the details of innovation.
27)
One reason we have seen continued growth in home-based businesses is
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A) the location offers a more secure operational environment. B) affordable technology makes it easier to compete. C) people need something to do while they wait to return to work for a large corporation. D) it is less risky to start a home-based business than other types of entrepreneurial ventures.
28) Which statement best describes the difference between an intrapreneur and an entrepreneur? A) Intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking businesses. B) Intrapreneurs are practical while entrepreneurs are creative. C) Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business. D) Intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in the management of all areas of a business.
29) Intrapreneurs make use of __________ to develop and launch new products and generate new profits. A) their employer's existing human, financial, and physical resources B) their own personal financial resources C) government-supplied physical and financial resources D) outside agencies or competitors
30)
Enterprise zones are
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A) government-owned properties that are available for entrepreneurial ventures at a reduced cost. B) similar to incubator facilities but strictly run by city and state governments. C) blighted areas that contain toxic materials making them unsuitable for business operations. D) specific locations across the United States where entrepreneurs can set up shop and receive tax breaks for operating in these areas.
31)
Enterprise zones and investor visas are examples of A) government policies that favor large corporations rather than small businesses. B) government programs that encourage economic growth through entrepreneurship. C) government policies designed to encourage intrapreneurs. D) private initiatives to reduce the government's role in the economy.
32) State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, these __________ continue to grow in popularity. A) enterprise zones B) incubators C) intrapreneurial development centers D) venture farms
33)
The "Spotlight on Small Business" box "Student Start-Ups" features students who
A) directed inheritance money they received into profitable business ventures. B) turned a passion into a business opportunity. C) realized the American dream at a very young age, and now run multimillion-dollar companies. D) convinced banks to fund their business ideas.
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34) As detailed in the "Adapting to Change" box, what is an ongoing challenge for small businesses which use Amazon's platform for online sales? A) The broad reach of Amazon creates a perfect environment for counterfeiters, who can be difficult to stop. B) Amazon customers are limited to the United States, and small businesses need to expand globally to survive. C) Few customers turn to Amazon when sourcing a small company's products. D) Amazon collects an enormous royalty on all online sales, making it impossible for small businesses to compete.
35) Sienna recently left her job at a large corporation to start her own business. She knows that her decision comes with risk, but she is excited to be her own boss and to tackle the challenges that running her own company will bring. Sienna is an example of a(n) A) intrapreneur. B) entrepreneur. C) venture capitalist. D) raconteur.
36) Bobbie created a new piece of workout gear. Although she couldn't initially find potential investors, she secured a personal loan and borrowed additional money from her parents. Her drive to continue believing in her idea and to remain enthusiastic shows that Bobbie is A) characteristically self-nurturing. B) better suited to managing a nonprofit organization. C) unaware of the risks she was taking. D) not a true entrepreneur.
37)
Apple's legendary smart team is an example of a company that succeeded by
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A) encouraging each manager to focus on a well-defined area of the business and build his own specialized department. B) bringing together a group of talented and experienced managers to conceive, develop, and market products. C) emphasizing a low price and low-cost strategy right from the beginning. D) assembling a group of employees whose inexperience was a plus, because they did not come with the baggage and institutional ideas of larger companies.
38) Melissa recently quit her job at a large firm and started a home-based business preparing medical transcriptions for doctors. Based on recent statistics, she can expect A) a negative reaction from friends and family who wonder when she will get a real job. B) the emergence of affordable technology will make it less challenging for her to compete with larger firms offering the same service. C) the government will discourage her attempts to create a home-based business in the hopes that she will opt for locating in an enterprise zone. D) to find security, routine, and a paycheck from her new enterprise.
39) Cal is an inventive engineering new graduate who just started working for a large company that makes medical products for both hospital and patient use. One of his primary responsibilities is to initiate and develop new products to complement the firm's current product line. Cal's position is A) intrapreneurial. B) entrepreneurial. C) an outside consultant for other firms. D) micropreneurial.
40) Midtown Community College received a government grant to create a business incubator. Once completed, Midtown Community College's facility will offer
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A) local government agencies assistance in obtaining funds for urban renewal. B) area businesses advice on employee benefits and ways to reduce taxes. C) venture capitalists an opportunity to identify new entrepreneurs. D) new businesses low-cost office space with basic business services.
41) Cody is an intrapreneur for a multinational wearable electronics company. Which statement best describes Cody's duty? A) He is expected to recruit new managerial talent for his firm. B) He will use the firm's existing resources to develop new products. C) He is concerned mainly with improving the firm's public image. D) He will concentrate on creating new ventures that can be spun off to become independent firms.
42) Henley inherited a successful dry-cleaning business from his parents. Just as his parents did, he offered high-quality service to all the customers he served. As the surrounding towns grew, several customers recommended that Henley expand the business to offer service in new locations. He chose to maintain only one operation, so as not to lose control and to keep his work life and home life balanced. Henley is a good example of a(n) A) small business affiliate. B) intrapreneur. C) micropreneur. D) enterprise zone participant.
43) Located at Monsanto's world headquarters, the Nidus Center is a unique __________ facility. The tenants are biotechnology companies who are at various stages of product development. The agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint Louis University, and several venture capital firms contribute seed money for these small start-up ventures that receive approval to further develop their ideas at the Nidus Center.
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A) incubator B) intrapreneurial C) enterprise zone D) micropreneurial
44)
When it comes to management issues, small businesses
A) deal with similar issues that large companies face. B) deal with very different issues than large companies or charities. C) need little accounting, record-keeping or marketing support due to their size. D) focus on state-of-the-art information and accounting technology but ignore employee relations.
45)
The Small Business Administration defines a small business as a firm that A) has fewer than 100 partners. B) is independently owned but not dominant in its industry. C) is dominant in its industry, but small in the number of workers it employs. D) has annual receipts of more than a specified amount depending upon the industry.
46)
Small businesses create about __________ percent of the new jobs in the United States. A) 25 B) 45 C) 65 D) 85
47)
A business's size is measured
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A) in relation to the number of competitors in its industry. B) in relation to other firms in its industry. C) in terms of the square footage of its facilities. D) as small, if it participates in the services sector.
48)
When comparing small businesses to their larger competitors, it is clear that A) bigger is always better. B) small firms can always outperform big firms on a level playing field. C) small firms often can offer more personalized customer services than big firms. D) small firms are slower to respond to opportunities than are large firms.
49)
Small businesses are important to the U.S. economy because
A) they fill in the gaps when large businesses want to let workers go on vacation or when large businesses want to temporarily cease production. B) banks and other financial services companies would not have borrowing customers, because small businesses borrow more than large businesses. C) they pay most of the tax revenue collected by the U.S. government. D) they create about 65% of new jobs each year and generate over 40% of the U.S. GDP.
50)
Using the analogy of boulders vs. sand for filling a hole, the textbook points out that
A) small businesses are employing a record number of employees because they have to work twice as hard at producing the same amount of output as a large competitor. B) small businesses can serve niche markets that larger firms do not serve well. C) the sand represents the small businesses that start and fail each year, while the boulders represent the large companies whose resources permit them to stay the course. D) large companies serve market niches so much better than small companies.
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51)
Which employment statistic about small businesses is true? A) Small businesses create about 15% of all new jobs in the United States. B) About 100,000 employee-hiring small businesses are started every year. C) A great majority of U.S. workers find their first jobs with a small business. D) Small businesses employ less than one-third of all private-sector employees.
52)
According to SBA guidelines, a manufacturing firm with 1,000 employees
A) would be classified as a large firm in the industrial sector. B) may be classified as a small business depending upon the size of others in the same industry. C) is too small to achieve the efficiencies of large-scale production. D) is classified as an S corporation.
53) Which statement accurately depicts an advantage that small business has over big business? A) If the small business owner can project his business as being big, if not very similar to big businesses that sell in the same industry, then he will realize a significant advantage. B) The size of the business (small being better in this case) is an important consideration in the management of legal, payroll, and tax concerns. C) A small business can maneuver and change quicker than most large businesses can. It can react to market conditions and customer concerns much faster. D) The slower pace of small businesses translates into better quality for its customers.
54) Entrepreneurs looking for a business that gives them the best opportunity to get rich should consider starting a business in
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A) the manufacturing sector. B) the food service industry. C) a low-risk industry. D) the agriculture sector.
55)
A review of small business successes and failures indicates that the
A) businesses that are easiest to start offer the greatest potential for long-term growth and profits. B) restaurant industry offers the least risk for entrepreneurs. C) businesses with the potential for high profit levels tend to be difficult to start and hard to keep going. D) reason the service sector is rapidly growing is that these firms are easy to start and keep going, and offer high levels of security and growth potential.
56) Griffin is focusing his attention on finding full-time employment now that he has graduated. He has decided to narrow his job search to jobs with a major corporation and ignore the possibility of working for a small business. His job search strategy A) makes sense because managerial skills are best developed by working for big firms. B) is smart because major corporations represent the most important source of employment growth in the United States. C) indicates that Griffin's passion is to fulfill his dream of owning his own business. D) will likely limit his job prospects since most new jobs are with small businesses.
57) Shay has landed a management position with a pioneering new small business after many years of working as a regional manager for a nationally known nonprofit. As Shay starts her new job, she is likely to find that
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A) due to the significant differences in large and small firms, her previous experience will be of little value in her new position. B) the principles of management are much the same at large and small firms. C) nonprofit organizations are motivated by their desire to help people and so financial management is of little importance. D) planning is more important to a nonprofit organization and less important to a small business so she will need to adjust the time she spends on the planning function.
58) As a result of recent downsizing at his firm, Emerson lost his job as an IT manager for a large telecommunications company. A true, self-confirmed computer nerd, Emerson knew that several of his past contacts often outsourced their computer problems. He decided it was a good time to test the waters and see if he could secure enough computer clients to be in business for himself. His success demonstrated that A) starting your own business can quickly provide security and profits. B) people always tend to hire people they know from past associations. C) the service sector is not an area of significant growth. D) successful big businesses often create profitable opportunities for small businesses.
59) Jayleen, a talented photography student, started her own photography business. She planned to solicit jobs from large corporations, which need headshots and other pictures for their annual reports and websites. Although filling a unique niche, Jayleen needed the security that the business would thrive and that she would earn enough to support herself and her family. She also hoped she would spend less time each day calling on potential clients and more time doing the actual shoots. As her small business consultant, which suggestion would you have for Jayleen?
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A) Jayleen should take the risk necessary to develop a small business, as it seems to meet her time, commitment and financial needs. B) In the beginning, it's doubtful that Jayleen will realize ease of entry, security, and good profits. She needs to make plans in the event that one or more of these does not materialize quickly. C) Photographers can take pictures of a multitude of things. It's probably not good strategy to limit her business to only photographing the needs of large corporations. D) Jayleen should definitely make time for herself each day so that she does not experience burnout. If she plans well, leaping into her own business will provide her with several hours of unstructured time each day where she can perfect her craft even more.
60) Dr. Desai just graduated from dental school. She is hoping to acquire the necessary funding to start her own dental practice. One advantage of this type of business is A) above-average opportunity to borrow funds at a high interest rate. B) nearly unlimited growth potential. C) the service is individualized and not easily mass-produced. D) very low start-up costs.
61) Jill opened a bakery in a seaside resort town. She was positive she had the perfect location as plenty of hotels and inns were within walking distance of her storefront. She planned to use her grandmother's recipes and only the finest ingredients for the upscale resort customers. During her first week of business, she was disappointed with lackluster sales. In fact, only a few resorts seemed to have any customers that week. Jill most likely A) did not publicize in the appropriate places. B) did not research or understand the local business cycle. C) overpriced the items she had for sale. D) did not consider that small businesses never get the name recognition that larger businesses and franchises realize.
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62) Jack, Jane, and Jarvis want to open a local cafe that serves a unique offering of coffee, weekend entertainment, and a limited menu of desserts. In one of the preliminary meetings, Jarvis presented a list of reasons that small businesses fail. Although many of the ideas on this list were applicable to many types of business, one challenge pertained specifically to the restaurant and bar business. The challenge he referred to was A) underestimating how much time it will take to build a market. B) borrowing money without planning just how and when to pay it back. C) carrying habits of personal extravagance into the business. D) some of the easiest businesses to start have the least growth prospects and greatest failure rates.
63) Rachel is graduating from culinary school soon and she often imagines opening her own comfort food restaurant. Her other passion is skiing in Colorado, where she wants to continue vacationing several times a year. As her small business advisor, you believe it necessary to provide her with information that will help her make good business decisions. What would be helpful for Rachel to know? A) Restaurants are relatively easy businesses to start, but are labor intensive and also have the greatest failure rate. B) Restaurants are not the easiest type of business to start, but once you get it going, you will have plenty of time for skiing. C) Most restaurant owners get rich if they open their own, independent restaurant as opposed to starting a franchised operation. D) Franchised operations will take less time on the part of the owner than a regular independently owned operation. If she opens a franchise, she will have more time for creativity in the business, and more time for skiing too.
64) A small business management course at a community college may offer entrepreneurs an opportunity to
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A) meet with experienced entrepreneurs and learn from their advice. B) try out ideas on students before risking their own time and money. C) listen to a qualified instructor solve all of the problems of small business owners. D) be part of a group that will include angel investors.
65) One way to get into business is to buy an existing company. The value of the business used to determine a fair purchase price is based on A) the prospects for business competition. B) the current owner's retirement plan. C) the amount of government contracts the company has. D) the value of what the business owns, what it earns, and what makes it unique.
66)
Conversations with people who start their own business often reveal that A) many small business owners got their entrepreneurial idea from a previous job. B) it is unusual for experienced corporate managers to start their own businesses. C) the most successful entrepreneurs often start their business ventures right after high
school. D) most small business owners begin with significant personal wealth.
67) For prospective entrepreneurs, enrolling in an introduction to business or small business management course offered through their community college A) is likely to be wasted time since college courses tend to be too theoretical. B) can be helpful by offering them an opportunity to meet experienced small business owners. C) serves as supplementary information, only after starting their business venture. D) seldom provides you with information to help make small business decisions.
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68) Which suggestion would an experienced business owner likely offer to help someone who is thinking about starting a business venture? A) Avoid the temptation of buying an existing firm. Build your own reputation and make your own mistakes. B) Gain experience by working for a successful businessperson. C) Postpone consulting with an accountant or lawyer until you can afford their services. D) Jump in quickly, before the market conditions change and opportunities are lost.
69)
Successful small business owners are
A) not good sources for information on starting your own business because they generally do not understand failure. B) valuable sources for information since you can learn from their experiences. C) good sources of some information but likely to tell you to jump right in without much funding. D) potential competitors who should be avoided.
70)
When starting a small business, it's important to remember
A) an affinity for taking large amounts of risk is the critical factor in achieving small business success. B) doing things differently from previous entrepreneurs is the real key to success. C) learning from others and gaining relevant business experience improves the odds for success. D) to avoid burnout by limiting the number of hours you work each week.
71) The "Making Ethical Decisions" box "Should You Stay or Should You Go?" addresses a dilemma worthy of consideration. It describes
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A) an unethical situation where the business owner's need for capital causes them to delay all payments to suppliers for 120 days, forcing several of his close business relationships out of business. B) the slow death of a business and how important it is to delay payments, sell off assets, and do everything possible to save a failing business except dismissing employees who need their jobs for survival. C) ethical decisions that need to be considered when employees leave a faltering business to start their own, eventually competing against their previous employer. D) the unethical and disloyal decision to leave your family business and start your own, taking with you all the family business's trade secrets.
72) Long-motivated by his wish to operate his own business, Carlos is considering purchasing an existing business. As he carefully weighs this option, he is likely to find that A) very few owners of small businesses have any interest in selling. B) his potential for success would greatly improve if he started his own new firm. C) the value of an existing business is determined by what the business owns, what it earns, and what makes it unique. D) any entrepreneur willing to sell their business is experiencing serious financial problems.
73) Dana hopes to start her own business after graduation this summer. In an effort to learn as much as she can about small business management, she talked to four friends who each offered their advice. Which suggestion is likely to help her the most? A) The best way to learn about running a business is by getting hands-on experience. You should quit school and put your dream into action. B) Take courses related to small business management and then look for a job with a successful businessperson, preferably in your field of interest. C) Since every business is unique, don't worry about advice from others. Go to a bank, get a business loan, and live your dream. D) Starting and managing a small business requires little more than common sense. If your idea is unique, hard work will guarantee your success.
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74) Travis benefited from his experience working for an established private company that provided state-of-the-art lighting for music venues around town. Although confident that he could start his own lighting business, he had limited capital to buy the necessary equipment needed to successfully compete with established companies. Which strategy would best help Travis achieve his goal of business ownership? A) Begin by offering to take over management of his employer's business, allowing the owner to enjoy some leisure time. B) Consider working for a major corporation, live modestly, and save until he has sufficient funds to start his business. C) Enroll in the closest university and apply for student loans. D) Open his business and trust that his work experience will bring him success even with insufficient capital.
75) Charlie remembers his grandfather telling him, "If you can find something you like to do, and somebody is willing to pay you to do it, that's the secret to a great life." The way Charlie saw it, this was his chance. For the past five years, he's been splitting his time between school and working at a local tree farm. The owner recently announced he was ready to retire. As Charlie began creating a business plan, he contemplated what the business might be worth. How much will he need to buy this business? What step should Charlie take next? A) Charlie needs to find a government database that outlines what nursery businesses are worth, on average, across the country. B) Charlie should speak with the current owner and determine the total value of assets (what the business owns), its earning potential, and its unique advantage. C) Charlie should determine the assessed value of the acreage that the business owns, and then bid competitively. D) Charlie needs to understand that it's difficult to buy an existing business, rather than start your own. The key will be to meet with the company's accountant, and explain your interest. The accountant will have all the answers.
76) are
Two key management functions that need particular attention when starting a business
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A) human relations and accounting. B) planning and financing. C) marketing and public relations. D) staffing and controlling.
77) A __________ is a written document that details the business idea, the target market and the business's competitive advantage, financial resources available for the business, and the qualification of the management. A) feasibility product B) marketing plan C) business plan D) statement of intent
78)
The business plan will include A) an analysis of the competition. B) names of banks the owner plans to visit. C) import/export information. D) names of employees.
79) A detailed written statement that describes the nature of the business, the target market, the firm's competitive advantages, as well as the owner's resources and qualifications is a A) business plan. B) entrepreneurial mission statement. C) profit and loss statement. D) professional action plan.
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80)
Entrepreneurs seeking financial support from bankers and potential investors should
A) be vague regarding their creative business plan to avoid having their idea stolen. B) seek the bankers' and investors' assistance in developing their business plan. C) create a detailed business plan to help the bankers and investors understand why this business will succeed. D) ask for a relatively small amount of capital initially, postponing a full funding request until the investors better understand the business concept.
81)
Bankers and potential investors are likely to read __________ first in a business plan. A) the executive summary B) the marketing plan C) the qualifications of the management team D) the analysis of the competition
82)
After personal savings, the most common source of capital for entrepreneurs is from A) large multinational banks. B) the Small Business Administration. C) state and local governments. D) friends and family.
83) __________ are private individuals who invest their own money in potentially hot new companies before these firms become larger, publicly traded companies. A) Leveraged buyout specialists B) Angel investors C) Venture investors D) Corporate raider investors
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84) Recently, many small businesses have found that __________ were more willing to lend money to smaller operations. A) large corporations B) credit card companies C) international banks D) smaller community banks
85) A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a A) corporate raider. B) takeover specialist. C) financial capitalist. D) venture capitalist.
86) Which government agency is responsible for encouraging the development of small business? A) Small Business Administration B) Federal Trade Commission C) Economic Research Service D) Federal Consulting Group
87)
Which investment source is the least likely type available to entrepreneurs? A) angel investors B) Small Business Administration loans C) venture capitalists D) family and friends
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88) The Small Business Administration's microloan program awards loans to entrepreneurs based primarily on their A) collateral. B) credit history. C) previous business success. D) integrity and sound business idea.
89)
A Small Business Investment Company (SBIC) is a(n)
A) agency of the federal government that loans money to high-tech firms. B) private investment company that is licensed by the SBA to make loans to small businesses. C) private firm that offers loans to small businesses in return for a share of ownership in the firm. D) agency set up by state governments to provide managerial advice and support to small businesses.
90)
One of the best places for young entrepreneurs to start shopping for an SBA loan is a A) Small Business Development Center. B) financial institution specializing in business loans. C) college or university financial aid office. D) website for the Venture Capitalists Association.
91) A __________ refers to people with unsatisfied wants and needs who are willing and able to buy a product or service.
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A) market B) consumer cooperative C) consumer collective D) buyer's cooperative
92)
To be considered part of a market, an individual must A) be a registered buyer. B) have made a purchase within the past 30 days. C) know the names and addresses of two or more sellers. D) have both a willingness to buy and the financial resources needed to buy.
93) Small business owners often struggle in attracting qualified workers. What contributes to this problem? A) Managers in small firms tend to be disrespectful to the workers. B) Owners will not often listen to ideas suggested by the workers. C) Employee relations are especially poor in small firms. D) Many jobs in small firms have low pay and few benefits.
94) Employees of small businesses often have greater job satisfaction than do employees of larger firms. One reason for this difference in job satisfaction is that employees of small businesses often A) earn higher wages. B) receive more vacation time. C) find their jobs more challenging. D) have more job security and better fringe benefits.
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95) A new business that sets up a(n) __________ from the start is saving itself time and grief later. A) angel investment network B) good accounting system C) detailed supplier network D) vertical marketing system
96) Small businesses must seek advice from outside experts. In order to put together official documents such as leases, contracts, and partnership agreements, it is important to seek the advice of A) a friend who has already started a business. B) a competitor in a similar business. C) an attorney. D) a marketing expert.
97) A(n) __________ is a valuable source of information regarding techniques to reduce a firm's exposure to risk. A) insurance agent B) accountant C) marketing consultant D) union business agent
98)
Similar to how large businesses proceed, small businesses make marketing decisions A) after the product or service is developed. B) before the business is funded. C) at the same time that they hire employees and research for an accountant. D) before a product is developed or store is opened.
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99) The Small Business Administration sponsors volunteers from industry, trade associations, and education who offer advice to small business owners. These volunteers are called A) the Small Business Council of Volunteers (SBCV). B) Partners in Service and Economic Progress (PSEP). C) Small Business Counselors Incorporated (SBCI). D) the Service Corps of Retired Executives (SCORE).
100)
Entrepreneurs applying for a bank loan should realize that bankers will A) expect to receive a share of ownership in the business in exchange for their loan. B) expect the entrepreneur to provide a business plan. C) generally make loans only to small businesses in high tech industries. D) offer only short-term financing.
101)
A good business plan will
A) focus on the big picture and omit the small details of operating the business. B) describe all aspects of the business, including product, the target market, the nature of the competition, any financial resources, and the owner's qualifications. C) be purposefully vague as specifics can restrict creativity and flexibility. D) focus on the nature of the business and the target market, omitting personal information about the owner in order to avoid personality issues.
102)
The executive summary section of the business plan contains
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A) computerized information that readers can access interactively. B) information that will capture the attention of bankers and other investors who receive many business plans every day. C) qualifications, experience, and education of the entrepreneur and prospective employees. D) a financial summary prepared by the business's accountant.
103) The "Outline of a Comprehensive Business Plan" box describes the plan's major sections, and suggests general strategies. What should you keep in mind regarding cover letters? A) Send a generic cover letter ahead of your business plan. If it generates a response, then follow-up with the full plan and a personalized letter. B) Skip the cover letter, as the shortest business plans are far more attractive to investors. C) Include a cover letter which impresses investors with lengthy descriptions and extensive details. D) Include a cover letter which summarizes your project, and address the letter to the potential investor by name.
104) According to the box “Outline of a Comprehensive Business Plan,” what section of your business plan should include a short description of the proposed business, and a recap of your major goals and objectives? A) Cover Letter B) Executive Summary C) Company Background D) Financial Plan
105) According to the box "Outline of a Comprehensive Business Plan," it is reasonable to assume that a quality business plan will take __________ to generate.
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A) around one or two weeks B) about two months C) at least six months D) over a year
106) When seeking financial backing from a venture capitalist, a small business owner should realize that the venture capitalist will A) charge an interest rate that is much higher than any other lender. B) not be interested in the management of the business. C) expect an ownership stake in the company in exchange for financial backing. D) demand that the money be repaid within 90 days or less.
107)
A market consists of potential buyers of a good or service. However, for a market to exist A) the business requires wholesalers and retailers. B) one firm must dominate in sales and product development. C) people must have unsatisfied wants and needs as well as a willingness and ability to
buy. D) the product must be laboratory tested and approved by the Food and Drug Administration (FDA).
108)
What statement is accurate about small business employees?
A) They usually dislike their jobs and look forward to finding employment with major corporations. B) They find their jobs less challenging than a similar job in a large corporation. C) They usually get paid higher wages than workers in large corporations. D) They often find more job satisfaction than their counterparts in big business.
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109) Entrepreneurs learn that there are many legal and financial issues involved in starting their business. The best way for the small business owner to resolve these issues and protect the firm's resources is to A) rely on and trust their common sense. B) hire a full-time lawyer and accountant who work exclusively for the small business. C) defer making decisions regarding these issues until the company is bigger. D) seek and pay for expert guidance and assistance.
110) In order to secure financing for Quik Cuts, a mobile hair salon to serve several large Silicon Valley firms, Willow demonstrated her unwavering aspiration to get her business started by visiting several bankers with her A) insurance agent. B) business plan. C) venture capitalist. D) idea.
111) In order to improve his chances of small business success, Miles worked hard to prepare his business plan. Most often, a positive outcome of this exercise is that the plan A) will meet federal reporting requirements of the Internal Revenue Service. B) ensures financing will be available from the Small Business Administration. C) enables Miles to think carefully about all aspects of his business idea. D) will protect Miles from failure.
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112) For several years, Lanie has volunteered to play the piano and sing at a local nursing home. Now, Lanie has decided to get into the growing eldercare market. She created Music and Memories, a nonprofit corporation that would hire local talent to perform her own music productions directed toward this market. In order to write and produce several productions each year, Lanie needed start-up funds. An instructor at the local community college suggested that she begin by __________, because this effort would help introduce her idea to interested investors as well as suggest government grant applications that Lanie might pursue. A) preparing her business plan B) finding talented performers C) writing holiday- themed performances D) developing a list of start-up costs
113) As a high net worth individual, Samantha searches for developing companies in need of additional funding to achieve their goals. In return for this __________, she expects to give up some percentage of ownership in the business. A) analysis B) venture capital C) corporate loan D) securities investment
114)
Otto is an angel investor. This means that he
A) invests his money in new businesses with potential for growth, hoping for a good return on his investment if they go public. B) creates business incubators for start-up web-based firms. C) invests in nonprofits that plan to change their status when they double in size. D) comes to the rescue of firms who default on their bank loans.
115) Valentina recently applied for a microloan from the Small Business Administration. Although several conditions are important, the SBA's decision to grant or deny the loan will largely depend upon
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A) her credit history and the collateral she can offer. B) her age since microloans are only available to senior citizens. C) her previous record of business success. D) the soundness of her business plan, and her integrity.
116) Alec came to the United States on a swimming scholarship. After a few months of frustration with trying to find the swim goggles he prefers from home, he created a website that sells specialty goggles for swimming, skiing, and snowboarding. Before launching the website and filling orders, Alec spent a few months going to swim meets and gathering preferences about goggles from other international swimmers. Alec's actions A) showed that he had a ready market for this product. B) demonstrated that he had little experience with this product. C) showed that he was promoting the website before it launched. D) demonstrated his need to better understand the market.
117) Jeremy was called by one of his regular customers asking if he had time to repair some broken sprinkler heads on that customer's underground sprinkling system. Although it was already 6:00 p.m. and he already put in a full day of work, he turned his car around and headed for the customer's house. As a small business owner, Jeremy demonstrates A) his need for additional cash flow. B) his ability to easily adapt and respond to his customer's needs. C) the fact that it is difficult to find employees willing to go the extra mile for a small business because benefits are nonexistent. D) his need for better oversight of his business to avoid emergency customer calls.
118) Oleg's four employees have been with him since he opened Ready Recruitment Services nearly a decade ago. As he anticipates staffing his new branch office, he decides none of these four long-time employees are ready to manage the office. Faced with this difficult situation, what should Oleg do?
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A) He should appoint one of the three anyway to show that he appreciates their loyalty and commitment. B) He should run the new branch himself and appoint one of the three to take over the original office. C) He should hire a new qualified employee to manage the office since utilizing his unready employees could be detrimental to the business. D) He should appoint all three to the new branch and let them run it using a team approach.
119) After Malin graduated from college last year, her uncle created an accounting position for her in his business. His son is in charge of purchasing inventory for the store, yet often the store runs out of popular items or is overstocked with products that must be marked down to be sold. Malin is confident that her cousin is more suited for handling accounting and finance, while she has a sense of what sells and how much sells. Although she has spoken with her uncle about it a couple of times, he seems reluctant to change. As the founder of the business, he may A) find it difficult to remove family members from positions, even if it is not good for the business. B) find it difficult to retrain Malin for the job, and even though his business is losing opportunities, he will stay the course. C) know that profit margins have declined, but he doesn't care. D) have a bigger picture of things, and not feel the need to respond to a family member's request.
120) As a small business owner, Darya can't afford to provide her employees with the high wages and benefits offered by big corporations. One way to keep her employees and create a high level of motivation would be to A) constantly communicate with them that "at least they have a job." B) adopt a policy of promoting workers who have been employed the longest. C) empower her employees to develop their own ideas. D) hire only family members, since they are more loyal.
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121) After retiring as a telecommunications executive, Harry joined SCORE. As a SCORE counselor, Harry will A) provide venture capital funds for aspiring small businesspeople. B) visit high schools to advise students who are thinking about starting their own business. C) help in the research and development of new products for entrepreneurs to market. D) provide consulting services to small businesses for free.
122)
The size of the world market is about A) 500 million B) 7 billion C) 7 million D) 10 trillion
123)
Increased participation in small business exporting owes credit to
A) political constituents who have made inroads abroad. B) large events such as the Olympics that have brought attention to the potential in world markets. C) technological advances such as the Internet and PayPal for safely fulfilling orders. D) partnerships that small businesses have formed with large businesses.
124)
One of the hurdles small businesses face when deciding to export is A) financing is often difficult to find. B) overseas buyers prefer dealing with large corporations. C) smaller companies must wait in line after large companies to qualify for tariffs. D) U.S. products are perceived as inferior.
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125)
One reason why many U.S. small businesses are not involved in exporting is
A) there is a limited market for their products. B) the government's new homeland security programs limit opportunities for small businesses. C) many of these firms do not know how to get started. D) U.S. products are perceived as inferior.
126) The SBA's __________ program provides export-financing opportunities for small businesses. A) Global Trade funding B) Homeland Security funding C) Export Express loan D) International Monetary loan
127)
What statement best describes the outlook for small businesses in international markets?
A) The world is a larger, and potentially a more lucrative, market than the U.S. domestic market. B) The threat of terrorist activities prevents small businesses from competing internationally. C) Most foreign buyers prefer to deal with large, well-known corporations rather than small businesses. D) Higher business costs eliminate the profit opportunities in global markets.
128) Small businesses often have advantages in international markets. Which best describes one those advantages?
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A) They have greater expertise in managing the paperwork required to sell goods in international markets. B) They have a better understanding of the cultural differences involved. C) They can provide individualized customer service as opposed to impersonal corporate bureaucracies. D) They have the ability to obtain financing through the International Monetary Fund.
129) Precision Packages LLC exports specialty printing equipment for the custom labeling, flexible packaging, and carton industry. Thanks to increased support from __________, this company's sales to Brazilian companies and other global opportunities have significantly increased. A) its newly revised website B) the Department of Commerce's Bureau of Industry and Security C) the FDA D) local politicians
130) Hiroshi is a partner in a firm that specializes in producing vitamins and health food products. While the business is considered small by U.S. standards, he is attempting to persuade his partner to expand internationally. What would Hiroshi likely describe as an advantage of going global? A) Exporting can help sell excess inventory. B) Marketing programs benefit from the cultural similarities in prospective markets. C) Financing can easily be obtained to expand internationally. D) Selling your products in other markets reduces their life cycle, making them more attractive.
131) Scott is considering marketing his bicycles in Peru. If he enters the Peruvian market, he is likely to learn that
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A) some cultures like dealing with individuals from smaller companies rather than large companies. B) he will not be able to keep up with demand. C) most foreign cultures prefer large company relationships to small company relationships. D) Peruvian firms have a strong resistance to U.S. products.
132) Pepe Pieman believes that pizza is a much more versatile meal than most people realize. As the national marketing manager for Pizza Pals, he has watched how consumers ate up barbecue pizza, Hawaiian pizza, Mexican pizza, and other new and unique combinations. His superiors, however, met his suggestions for other unusual pizzas with a negative response. Even some of his teammates laughed at his ideas. Pepe's confidence in his ability to understand the market has led him to focus on planning a business of his own. Pepe realizes that he will take a risk when he leaves his job with Pizza Pals and sets off on a new endeavor: Pepe's Pizzazzeria. Pepe is excited about the potential of profitably catering to the unmet desires of pizza consumers.
132.1) Given Pepe's willingness to accept the risks of opening and running Pepe's Pizzazzeria, he is clearly an example of a(n) A) arbitrageur. B) intrapreneur. C) gambler. D) entrepreneur.
132.2) Pepe remains confident and enthusiastic even though his colleagues have poked fun at his ideas. This shows that Pepe is A) self-disciplined. B) self-nurturing. C) self-generating. D) self-delusional.
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132.3) Pepe is confident that Pepe's Pizzazzeria will be a success, but only if he has enough money to do things right. Since Pepe has very little personal wealth, he knows he must find financial assistance. In order prepare for meetings with bankers and potential investors, Pepe should A) hire a public relations firm to develop promotional materials. B) develop a business plan. C) read a book on entrepreneurship. D) create a partnership contract.
132.4) Pepe has asked about the possibility of obtaining a microloan from the SBA. This type of loan is awarded primarily on the basis of the A) borrower's integrity and the soundness of the business idea. B) amount of collateral the borrower can pledge. C) borrower's credit history and record of previous business success. D) age of the borrower, since only senior citizens qualify.
132.5) Pepe is positive he knows a lot about marketing. But he is not as confident in his skills within the legal or financial aspects of starting a new business. He wants to consult with a lawyer and accountant, but his budget is tight with all of the expenses involved in getting Pepe's Pizzazzeria up and running. Pepe should A) delay talking with a lawyer and accountant until the business has established a positive cash flow for at least one year. B) trust his basic instincts and try to put it together without the advice of lawyers and accountants. C) consult with a lawyer and accountant even though the budget is tight. D) immediately hire full-time lawyers and accountants for his staff.
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132.6) Since Pepe has worked in marketing for a large corporation before getting into the pizza business, A) there is no need to consider an entrepreneurial team for start-up due to the fact that all other management functions are served by marketing. B) he can skip any marketing research steps that the SBA recommends. C) he knows that the type of business he wants to start may be difficult to develop, but it has a tremendous amount of security due to its promise of long-term survival. D) he plans to put together an entrepreneurial team of experts that will complement his expertise.
132.7) As a former classmate of Pepe's at the nearby university, you recall what you both learned in your small business management class several years ago. What would you remind him when he asks for advice? A) Restaurants are easy to start up, but difficult to keep going. B) Restaurants are probably the most difficult type of business to start up, due to the labor-intensive aspects of the business. C) Experts believe that restaurants have a high profit potential, due the fact that there is not much direct competition. D) Restaurants are easy to start up and have great profit potential.
133)
Entrepreneurship involves accepting the risk of starting and running a business. ⊚ true ⊚ false
134)
Entrepreneurship is another name for management. ⊚ true ⊚ false
135)
Entrepreneurs are less important now than in the past to the U.S. economy.
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⊚ ⊚
true false
136) While entrepreneurs frequently earn significant profits for themselves, their impact on society is quite small. ⊚ true ⊚ false
137) Many businesses started by entrepreneurs have grown into major corporations employing thousands of workers. ⊚ true ⊚ false
138)
Entrepreneurs are motivated by the desire to earn a profit. ⊚ true ⊚ false
139)
Entrepreneurs take calculated risks. ⊚ true ⊚ false
140)
Most entrepreneurs prefer working for someone else. ⊚ true ⊚ false
141)
Most entrepreneurs are more interested in personal achievement than in power.
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⊚ ⊚
true false
142) If you have managerial skills and leadership ability, you also possess the personality to be an entrepreneur. ⊚ true ⊚ false
143) Because of the stress of being in business for yourself, it's important that entrepreneurs have people around them to help replenish their enthusiasm. ⊚ true ⊚ false
144)
Successful entrepreneurs rely on others for direction and support. ⊚ true ⊚ false
145)
Successful entrepreneurs accept the risk of failure. ⊚ true ⊚ false
146)
Entrepreneurs avoid risk and place a high priority on security. ⊚ true ⊚ false
147)
It is important for an entrepreneur to be highly energetic.
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⊚ ⊚
true false
148) Most entrepreneurs get the ideas for their products and services from a flash of inspiration. ⊚ true ⊚ false
149) Potential entrepreneurs would be well advised to surround themselves with people who are smarter than they are. ⊚ true ⊚ false
150) An entrepreneurial team is a group of experienced managers who share the same skills and abilities. ⊚ true ⊚ false
151) Entrepreneurial teams combine the creative, marketing, and production ideas of a group of experienced people. ⊚ true ⊚ false
152) Micropreneurs is a term used to describe entrepreneurs who focus on the continued growth of their businesses. ⊚ true ⊚ false
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153) The most important difference between entrepreneurs and micropreneurs is the focus placed by micropreneurs on balancing the demands of work and family. ⊚ true ⊚ false
154) The primary concern of micropreneurs is to balance the risk of starting your own business with the desire to build a powerful organization earning significant profits. ⊚ true ⊚ false
155)
Many micropreneurs are home-based business owners. ⊚ true ⊚ false
156) Micropreneurs are motivated by a desire to have both a satisfying family life and rewarding work. ⊚ true ⊚ false
157)
Advancements in computer technology put home-based businesses at a disadvantage. ⊚ true ⊚ false
158)
Many micropreneurs operate home-based businesses in various service industries. ⊚ true ⊚ false
159)
Corporate downsizing reduces the opportunities for home-based businesses.
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⊚ ⊚
true false
160) Successful micropreneurs require self-discipline to separate work from family responsibilities. ⊚ true ⊚ false
161) Micropreneurs are exempt from the local ordinances that restrict home-based businesses from operating in residential areas. ⊚ true ⊚ false
162) One advantage enjoyed by home-based businesses is the relative ease in attracting new customers. ⊚ true ⊚ false
163)
Small businesses have not significantly participated in online sales. ⊚ true ⊚ false
164)
Online businesses avoid the risk of failure faced by traditional start-up businesses. ⊚ true ⊚ false
165)
An intrapreneur is the creative person who starts and manages a nonprofit organization.
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⊚ ⊚
true false
166) Creative people working as entrepreneurs within a large organization are called intrapreneurs. ⊚ true ⊚ false
167)
Entrepreneurial spirit is unique to a small business environment. ⊚ true ⊚ false
168) Large organizations encourage intrapreneurship as a strategy to improve their profitability through new products. ⊚ true ⊚ false
169) By passing the Immigration Act of 1990, the U.S. government acted to encourage entrepreneurs to immigrate to the United States. ⊚ true ⊚ false
170)
The U.S. government offers investor visas to attract more entrepreneurs. ⊚ true ⊚ false
171) The position of our government is to restrict foreign entrepreneurs from operating within the United States.
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⊚ ⊚
true false
172) Business incubators provide assistance to established companies attempting to generate foreign sales. ⊚ true ⊚ false
173) A National Business Incubator Association study indicates that over 85 percent of incubator graduates remain in business. ⊚ true ⊚ false
174) Enterprise zones offer lower tax rates and government assistance to attract private business investment. ⊚ true ⊚ false
175) Independence, challenge, and opportunity are among the key reasons given by those who assume the risks of entrepreneurship. ⊚ true ⊚ false
176)
Successful entrepreneurs are exclusively motivated by the desire to become rich. ⊚ true ⊚ false
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177) Although corporate managers often exhibit the skills required of successful entrepreneurs, they seldom have the desire to give up the perks and fringe benefits of corporate life and start their own business. ⊚ true ⊚ false
178) To be successful, entrepreneurs are dependent on the support of others for encouragement. ⊚ true ⊚ false
179) Entrepreneurial teams increase the cooperation between marketing, production, and other functional areas of a business venture. ⊚ true ⊚ false
180) State governments create new start-up business organizations called enterprise zones that are later sold to private investors. ⊚ true ⊚ false
181) The United States government views entrepreneurship as a result of an individual's selfmotivation. The government can do very little to encourage an individual to become an entrepreneur. ⊚ true ⊚ false
182) The "Spotlight on Small Business" box is testimonial to the fact that entrepreneurs are problem solvers.
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⊚ ⊚
true false
183) According to the "Spotlight on Small Business" box, people in college are not ready to start their own business. ⊚ true ⊚ false
184) The box feature "Small Businesses Struggle to Fight Fakes on Amazon" discusses challenges of the online marketplace. It is evident that offering goods for sale on Amazon is a mistake for small businesses. ⊚ true ⊚ false
185) Cheryl wants to start and run her own business. Although she acknowledges it would be helpful to earn a healthy profit, her main motivation is the exhilaration and challenge of starting and running a business. Cheryl's attitude is different from most small business owners, who usually focus solely on the earnings potential of their ventures, as well as the opportunity to acquire power and prestige. ⊚ true ⊚ false
186) Bernard is a dreamer rather than a doer. This will make him an ideal entrepreneur since their job is to be creative and develop new ideas that are then implemented by others. ⊚ true ⊚ false
187) Quinn has eliminated any risks associated with entrepreneurship by preparing a detailed business plan.
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⊚ ⊚
true false
188) Brad, George, and Kaden are working in the marketing department of a multinational corporation. They each have similar backgrounds and experience and are thinking about leaving their current company to start their own business. Successful entrepreneurial teams are comprised of these types of people because similarities in knowledge and skill ensure harmony and consistency in their new business. ⊚ true ⊚ false
189) Lucien works for an accounting firm. However, his dream is to establish a home-based business providing his services to a variety of businesses. Lucien’s primary goal is to escape the 9 to 5 world of corporate accounting and to enjoy the opportunity of working for himself. Lucien is an example of a micropreneur. ⊚ true ⊚ false
190) Teagan works for On the Move, a large corporation that designs and manufactures accessories for scooters, bicycles, and other children's motorized toys. She is a creative force within the company and has helped create and launch several new successful products. Teagan is an example of an intrapreneur. ⊚ true ⊚ false
191) Leo received an e-mail stating that HE COULD EARN THOUSANDS!!!! just working a few hours from home. Most likely Leo's e-mail was a work-at-home scam. ⊚ true ⊚ false
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192) When Yasmin created the Yummy Cookie Company, she took advantage of a statesupported incubator that offered her new business low-cost office space and basic services such as accounting, legal advice, and secretarial help. Joining the incubator helped her company to survive because it provided assistance in the critical stage of its early development. ⊚ true ⊚ false
193) The principles of management of a large business are similar to the principles of management of a small business. ⊚ true ⊚ false
194)
To be classified as a small business, a firm must have no more than 100 employees. ⊚ true ⊚ false
195) According to the Small Business Administration's definition, small businesses are independently owned and operated. ⊚ true ⊚ false
196)
A business is considered small by comparing its size to others in the same industry. ⊚ true ⊚ false
197)
Small businesses create 65% of the new jobs in the United States each year. ⊚ true ⊚ false
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198)
Small businesses account for over 40% of the U.S.'s gross domestic product (GDP). ⊚ true ⊚ false
199)
About 80% of U.S. workers find their first job in small business. ⊚ true ⊚ false
200) Of all nonfarm businesses in the United States, almost 96% are considered small by the Small Business Administration (SBA) standards. ⊚ true ⊚ false
201) Compared to small businesses, large firms have a greater ability to provide personalized customer service. ⊚ true ⊚ false
202)
Big businesses do not serve all the needs of a market. ⊚ true ⊚ false
203)
The most common small business failures occur in businesses that are the easiest to start. ⊚ true ⊚ false
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204) Only about 10% of all businesses qualify as small businesses using the definition of the Small Business Administration. ⊚ true ⊚ false
205)
The small business sector that has the best chance of significant growth is legal services. ⊚ true ⊚ false
206) Small businesses can often provide more personalized customer service than bigger rivals. ⊚ true ⊚ false
207) Recent evidence suggests that the small business failure rate is significantly higher than previously reported. ⊚ true ⊚ false
208)
Bad luck is the most often reported cause for small business failure. ⊚ true ⊚ false
209) The business opportunities with the greatest growth potential tend to be in the high technology industries. ⊚ true ⊚ false
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210)
The easiest businesses to start are those that offer the greatest profit potential. ⊚ true ⊚ false
211)
Most business opportunities offer entrepreneurs high levels of security and profits. ⊚ true ⊚ false
212) The easiest businesses to start also have the least growth potential and the greatest failure rates. ⊚ true ⊚ false
213) While the first job for many people is working for a small business, larger corporations create most of the permanent new jobs. ⊚ true ⊚ false
214) If you are trying to prevent failure, it is a good idea to go into the business with good record-keeping techniques. ⊚ true ⊚ false
215) If you go through the exercise of preparing a business plan, only to determine that you need twice the amount of money to start the business than you have, the SBA and other expert organizations encourage you to go ahead with your plans because if you understand the market, you can use the revenues you accrue to make up the shortfall.
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216)
true false
Small businesses lack the resources to compete directly with big businesses. ⊚ true ⊚ false
217) Because of their greater financial resources and expert staffs, big corporations can almost always outperform small businesses. ⊚ true ⊚ false
218) Chanda has just graduated with a business degree. Her job hunt should only focus on large corporations. ⊚ true ⊚ false
219) Sylvie, a manager at a small manufacturing firm, has offered to help manage a local branch of the YMCA. Unfortunately, Sylvie will find that the skills acquired managing a small business will not be useful in managing a nonprofit organization. ⊚ true ⊚ false
220) Your brother is a dentist and has opened a new practice in your hometown. As a business student you know that this type of business experiences low failure rates. ⊚ true ⊚ false
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221) Finley wants to start her own small business. If her primary goal is to grow quickly and earn high profits, her best chances would be in the manufacturing sector. ⊚ true ⊚ false
222) Remi wants to start a small business. But he has not yet uncovered an opportunity that would offer him security and the possibility of high profits. Remi will likely find that one must risk more in order to attain high profits. ⊚ true ⊚ false
223)
The best way to learn about small business is to "bite the bullet" and start your own. ⊚ true ⊚ false
224) Individuals wanting to learn about small business operations are advised to learn from other entrepreneurs. ⊚ true ⊚ false
225) Many entrepreneurs got the idea for their own business from their experience of working for others. ⊚ true ⊚ false
226) Since entrepreneurs are starting new businesses, experience gained from working for an established business is not particularly helpful. ⊚ true ⊚ false
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227) Offering to manage an established business for a percentage of the profits plus a salary offers experience to the would-be entrepreneur and free time to the business owner. ⊚ true ⊚ false
228) Entrepreneurs are well advised to avoid starting businesses in the same market in which they were previously employed. ⊚ true ⊚ false
229) You can negotiate a win-win situation by offering to manage an established small business. You win from the experience; the owner wins with free time. ⊚ true ⊚ false
230) If you were to begin gathering information on a particular type of business, it is doubtful that a community college class would benefit your search because the information you would gain is too generic in nature. ⊚ true ⊚ false
231) There are several ethical considerations when starting a business, but competing against current and former work relationships is always fair game. ⊚ true ⊚ false
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232) Miller hopes to start his own business someday. He should not talk to other small business owners about his plans because they might steal his ideas. ⊚ true ⊚ false
233) Audrey worked as a floral designer at a floral shop in town before opening her own shop. This approach to the business is okay, but her time would be put to better use starting her own business. ⊚ true ⊚ false
234) As an employee of a small business, Connor has heard the owner is getting ready to retire. Since Connor would like to buy the business, he needs to determine how much the business is worth. In order to determine a fair price for the business, Connor should add up the market value of all of the firm's physical assets such as buildings, machinery, equipment, and inventory, and willingly pay this amount for the business. ⊚ true ⊚ false
235) The two primary concerns of an entrepreneur starting a new business are planning and record keeping. ⊚ true ⊚ false
236) According to the Small Business Administration, poor management is a major cause of small business failures. ⊚ true ⊚ false
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237) Business plans are necessarily a bit vague since these are prepared prior to the beginning of business operations. ⊚ true ⊚ false
238) A good business plan describes the nature of the proposed business, the target market, the competitive advantages, and the qualifications of the owners. ⊚ true ⊚ false
239)
Bankers and investors require entrepreneurs to present a well-conceived business plan. ⊚ true ⊚ false
240) Getting a business plan into the hands of the right people is nearly as important as getting the right information in the plan. ⊚ true ⊚ false
241) The entrepreneur's integrity is not relevant to bankers when determining the creditworthiness of a business loan. ⊚ true ⊚ false
242) Software designed to help create business plans has proven to be of little value because it is difficult to apply it to every business situation. ⊚ true ⊚ false
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243) Since creating a detailed business plan is almost impossible, entrepreneurs should focus on the other tasks needed to get their firm started. ⊚ true ⊚ false
244) Management includes attention toward financing the business, hiring employees, marketing, and record keeping. ⊚ true ⊚ false
245) Identifying poor management as the cause of a small business failure likely covers a variety of problems. ⊚ true ⊚ false
246) Aside from personal savings, the only other viable source of financing for an entrepreneur would be funds available from friends and family. ⊚ true ⊚ false
247) Potential suppliers can be an excellent source of financing for a new business since lending money to a new customer may be very much in their own interest. ⊚ true ⊚ false
248) Angel investors are the government agencies that invest money in new companies before they go public.
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⊚ ⊚
true false
249) Venture capitalists provide funds for start-up businesses in exchange for part ownership in the new firm. ⊚ true ⊚ false
250)
State and local governments often act as venture capitalists. ⊚ true ⊚ false
251) While the Small Business Administration provides management advice to new business owners, it is not empowered to provide financial assistance. ⊚ true ⊚ false
252) Venture capitalists provide funds for small businesses as part of their philanthropy programs. ⊚ true ⊚ false
253) Venture capitalists prefer investing in smaller start-up businesses in order to reduce their overall risk. ⊚ true ⊚ false
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254) The Small Business Administration's microloan program offers small businesses very small loans. ⊚ true ⊚ false
255) Small Business Administration microloans are based on the borrowers' integrity rather than collateral and credit history. ⊚ true ⊚ false
256) In order to qualify for a microloan from the SBA, an entrepreneur must have adequate collateral and a proven track record of success. ⊚ true ⊚ false
257) Small Business Investment Companies (SBICs) are privately owned companies licensed by the Small Business Administration to lend money to small businesses. ⊚ true ⊚ false
258) The SBA may guarantee loans made by a financial institution and repay them if the borrowers stop making payments. ⊚ true ⊚ false
259) Success in running a business depends on knowing your customers, managing your employees, and keeping efficient records. ⊚ true ⊚ false
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260) In the business world, a market consists of those people who have a willingness to buy a particular product. ⊚ true ⊚ false
261) One of the greatest advantages that small businesses have over larger ones is the ability to know their customers better and to adapt quickly to the customers' needs. ⊚ true ⊚ false
262) Attracting qualified workers presents a problem for small businesses since they usually offer less money, fewer benefits, and less room for advancement than larger firms offer. ⊚ true ⊚ false
263) As their firms grow and prosper, busy entrepreneurs take pleasure in delegating authority to others. ⊚ true ⊚ false
264) Studies show that seniority is the most important criterion when selecting employees for promotion to management positions. ⊚ true ⊚ false
265) Compared to employees of large businesses, small business employees are less satisfied with their work because they see their jobs as less challenging.
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true false
266) Hiring family members offers the best answer to the problem of attracting qualified employees. ⊚ true ⊚ false
267) Questions about how much authority to delegate and to whom, are easier issues for family-run businesses since they can't fire family. ⊚ true ⊚ false
268) With fewer employees and less revenue, small businesses have less need for detailed records than do larger business organizations. ⊚ true ⊚ false
269) Many small business owners report that they needed assistance with accounting when they first started businesses. ⊚ true ⊚ false
270) Commercial loan officers and insurance agents offer expert assistance that can be valuable to small business owners. ⊚ true ⊚ false
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271) One way to control the legal costs associated with operating a small business is to purchase a prepaid legal plan. ⊚ true ⊚ false
272) Commercial loan officers serve as a resource for small business owners for information regarding risk management. ⊚ true ⊚ false
273) Many more new entrepreneurs are turning to crowdfunding sites, like Kickstarter, to raise funds for their endeavors. ⊚ true ⊚ false
274) Management includes attention toward financing the business, hiring employees, marketing, and record keeping. ⊚ true ⊚ false
275) Prior to creating a business plan, discussions with bankers and investors can help entrepreneurs determine the amount of financing available. ⊚ true ⊚ false
276) An effective business plan analyzes the competition and identifies the resources required to profitably serve a target market. ⊚ true ⊚ false
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277) When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business. ⊚ true ⊚ false
278) As opposed to venture capitalists, angel investors prefer to target their investments in established firms requiring large sums of money. ⊚ true ⊚ false
279) A major advantage of preparing a formal business plan is that prospective entrepreneurs must identify the resources and activities required to successfully operate their proposed venture. ⊚ true ⊚ false
280) If you plan to meet face-to-face with a banker or venture capitalist, it is not necessary to submit a business plan. ⊚ true ⊚ false
281) In order to better serve their customers, small business owners should avoid delegating authority to their employees. ⊚ true ⊚ false
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282) As a future entrepreneur, Leanne considered a variety of financing sources. Her discussions with a venture capitalist revealed that this type of investor expects to receive a large ownership interest in her firm. ⊚ true ⊚ false
283) Hoping to qualify for a Small Business Administration microloan, Beth's business plan clearly pinpoints her strategy to gainfully serve her target market. Unfortunately, her lack of business experience and limited collateral greatly reduce her chances of obtaining the microloan. ⊚ true ⊚ false
284) Sebastian's long-time interest in and knowledge of computers enabled him to design a new hard drive that is better than anything else on the market. Sebastian's product and business plan will likely attract several sources of financing if he is willing to give up part ownership in his company. ⊚ true ⊚ false
285) Because college students realize the importance of nursing homes for our aging population, students comprise an attractive market for nursing home insurance policies. ⊚ true ⊚ false
286) Ethan believes his family-run business is more likely to avoid many of the problems growing businesses have with managing employees. His attitude will likely hinder the growth of his company. ⊚ true ⊚ false
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287) Gretta hopes to start her own business soon, but is concerned about her limited financial resources. She should save money by waiting to meet with lawyers and accountants until the business has grown and has been operating successfully for a few years. ⊚ true ⊚ false
288)
The number of small businesses that export has increased dramatically recently. ⊚ true ⊚ false
289) Large multinational firms dominate the international market, leaving few opportunities for small businesses. ⊚ true ⊚ false
290) One advantage enjoyed by small businesses in international markets is that overseas buyers like dealing with individuals rather than large corporate bureaucracies. ⊚ true ⊚ false
291) Due to government support and few restrictions, the majority of U.S. small businesses are involved in exporting. ⊚ true ⊚ false
292) Exporting offers small businesses opportunities to reduce their dependence on domestic sales and extend product lives. ⊚ true ⊚ false
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293) Small Business Administration loans help firms finance their domestic operations. These funds, however, cannot be used to finance exports since the money is provided by U.S. taxpayers. ⊚ true ⊚ false
294) Small businesses can provide more personalized service than a large corporation to overseas customers. ⊚ true ⊚ false
295)
The Internet has slowed small businesses' participation in international markets. ⊚ true ⊚ false
296) From a competitive standpoint, small businesses cannot expect to successfully compete with large corporations in international markets. ⊚ true ⊚ false
297) The only real barrier preventing small businesses from exporting is insufficient knowledge of the opportunities available. ⊚ true ⊚ false
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298) As the owner of a small manufacturing business, Aron has an interest in exporting. However, he doesn't know how to get started. Fortunately, the government provides an abundance of information to encourage entrepreneurs like Aron. ⊚ true ⊚ false
299) Montel is a recent college graduate with a business degree. While still in school, he learned that as a potential small business owner, he should focus his sights on domestic business only. ⊚ true ⊚ false
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Answer Key Test name: chapter 6 6) D 7) B 8) B 9) D 10) A 11) A 12) B 13) C 14) C 15) D 16) B 17) A 18) B 19) B 20) B 21) B 22) D 23) C 24) D 25) A 26) C 27) B 28) C 29) A 30) D 31) B
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32) B 33) B 34) A 35) B 36) A 37) B 38) B 39) A 40) D 41) B 42) C 43) A 44) A 45) B 46) C 47) B 48) C 49) D 50) B 51) C 52) B 53) C 54) A 55) C 56) D 57) B 58) D 59) B 60) C 61) B
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62) D 63) A 64) A 65) D 66) A 67) B 68) B 69) B 70) C 71) C 72) C 73) B 74) A 75) B 76) B 77) C 78) A 79) A 80) C 81) A 82) D 83) B 84) D 85) D 86) A 87) C 88) D 89) B 90) A 91) A
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92) D 93) D 94) C 95) B 96) C 97) A 98) D 99) D 100) B 101) B 102) B 103) D 104) B 105) C 106) C 107) C 108) D 109) D 110) B 111) C 112) A 113) B 114) A 115) D 116) D 117) B 118) C 119) A 120) C 121) D
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122) B 123) C 124) A 125) C 126) C 127) A 128) C 129) B 130) A 131) A 132) Section Break 132.1) D 132.2) B 132.3) B 132.4) A 132.5) C 132.6) D 132.7) A 133) TRUE 134) FALSE 135) FALSE 136) FALSE 137) TRUE 138) TRUE 139) TRUE 140) FALSE 141) TRUE 142) FALSE 143) FALSE 144) FALSE
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295) FALSE 296) FALSE 297) FALSE 298) TRUE 299) FALSE Student name:__________ 1)
Identify and define the four key functions of management.
2)
Explain the differences between strategic, tactical, operational, and contingency planning.
3) What is the purpose of the SWOT analysis? What types of information does this analysis provide?
4) What is empowerment? How has the movement toward empowerment changed the role of the manager?
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5) Describe the three basic types of management skills, and relate these skills to the tasks performed by different levels of management.
6) Describe three different leadership styles and give an example of a situation in which each style could be most used effectively.
7)
Management is more progressive today. There is more emphasis on A) individual work that can be successfully measured. B) working in teams. C) striving to eliminate the control function of management. D) placing greater reliance on the government for financing.
8)
One of the challenges facing today's managers is to
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A) deal with a workforce that is less educated and less self-directed than in the past. B) find ways to encourage conformity instead of diversity. C) guide a more educated workforce. D) cope with the sudden and unexpected slowdown in the pace of innovation and change.
9)
Which statement is accurate about modern managers?
A) They prefer to use the autocratic style of leadership. B) They emphasize teamwork and cooperation rather than discipline and order giving. C) They face fewer challenges and problems than managers in the past. D) They can rely on a much higher level of worker loyalty to the organization than in the past.
10) The revolution in management that is currently under way suggests that the most effective managers of the future will A) be very strict in their treatment of workers. B) emphasize individual initiative rather than teamwork. C) specialize in performing one of the four management functions. D) emphasize teamwork.
11)
How are managers today different from managers in the past? A) Managers today are more likely to reprimand workers. B) Managers in the past would use praise and gentle suggestions. C) Managers in the past were less loyal to their employer. D) Managers today emphasize teamwork.
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12)
Which statement reflects changes in the role of management?
A) Most workers today show little initiative or creativity, so managers must spend more time directing their efforts. B) The marketplace is becoming global, which increases both competition and opportunities for cooperation and integration. C) Firms are recognizing that their workforces are too diverse, so managers must find ways to reduce diversity without violating federal laws against discrimination. D) The desire to encourage teamwork has resulted in larger, more cumbersome organizations with too many workers.
13)
__________ is the art of utilizing organizational resources to accomplish goals at work. A) Socialization B) Justification C) Preparation D) Management
14)
One of the four primary functions of management is A) controlling. B) marketing. C) financing. D) designing.
15) The management function concerned with anticipating future trends and determining the best strategies to achieve an organization's goals and objectives is known as A) directing. B) leadership. C) planning. D) forecasting.
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16) When managers work on creating conditions and systems to ensure that everything and everyone works together to achieve the organization's goals, they are involved in the __________ function of management. A) controlling B) leading C) planning D) organizing
17) __________ is the management function that involves determining whether an organization is progressing toward its goals, rewarding employees for doing a good job, and taking corrective action when they are not. A) Organizing B) Controlling C) Leading D) Officiating
18) __________ is the management function that involves setting goals, strategies, and tactics for achieving the organization's goals and objectives. A) Forecasting B) Planning C) Conceptualizing D) Controlling
19) __________ is the management function of creating a vision for the organization and guiding, training, coaching, and motivating employees to help achieve the goals and objectives of the organization.
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A) Organizing B) Controlling C) Leading D) Officiating
20) Which goal best describes today's view of the organizing function? Organizing today focuses on A) achieving unified opinions from a diversified workforce. B) designing the organization around the customer. C) simplifying the process of measuring outcomes related to performance standards. D) developing the most efficient strategic plans for the firm.
21) When managers determine that an organization is not making sufficient progress toward achieving its goals and objectives and they develop corrective measures, they are involved in A) controlling. B) planning. C) directing. D) accounting.
22) When managers identify a market trend that suggests a new opportunity and then devise a strategy to go after this new opportunity, they are involved in the function of A) controlling. B) planning. C) leading. D) organizing.
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23)
Which activity would be a part of the leading function of management?
A) Devising a new strategic plan to enter a new foreign market currently dominated by a competing firm B) Recruiting qualified workers to join the organization and assigning them to their proper position C) Examining a financial report to see whether the firm's profits are improving and taking corrective action if they are not D) Training and coaching workers to help them understand their job and perform it effectively
24)
Which activity is part of the planning function of management? A) Assigning a particular worker to do a specific task B) Looking at market forecasts to identify future business opportunities and challenges C) Praising a sales representative who has far exceeded her monthly sales objectives D) Conducting a job interview with a potential new employee
25)
Which activity is part of the organizing function of management?
A) Going over a spreadsheet to analyze some financial data B) Teaching a new employee how to use a piece of office equipment C) Giving front-line workers additional resources needed to provide faster and better service to customers D) Developing a broad general strategy to help the organization meet its long-term growth objectives
26) As a manager, two of April's greatest strengths are her ability to clearly communicate goals and her ability to guide, coach, and motivate her employees. Based on these strengths, __________ is a management function that April is likely to be good at performing.
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A) controlling B) planning C) leading D) organizing
27) Charlotte, a manager for Everyday Beauty Company, has just been given a report showing sales in her region are lower than anticipated for the third quarter. Her next task is to determine the reason for the disappointing results and find a way to get sales up to their desired level. Charlotte's efforts are part of the __________ function of management. A) controlling B) directing C) organizing D) planning
28) A __________ is an overall explanation of why an organization exists and where it is trying to head. A) tactical plan B) prime directive C) corporate charter D) vision
29)
A vision for a company is A) an explanation of why the company exists and where it wants to go. B) the same thing as an objective. C) a detailed plan that outlines the major organizational structure of the firm. D) very relevant for the short term, but less useful for the long term.
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30)
A meaningful mission statement should address topics such as the organization's A) form of ownership and methods of financing. B) self-concept and company philosophy. C) advertising strategy and distribution plan. D) tactical plans and contingency plans.
31) Employees often work with managers to develop a(n) __________ that outlines the fundamental purposes of their organization. A) organization chart B) value statement C) mission statement D) PERT diagram
32)
__________ involves setting the organization's vision, goals, and objectives. A) Organizing B) Planning C) Controlling D) Directing
33)
__________ are broad, long-term accomplishments an organization wants to achieve. A) Goals B) Objectives C) Directives D) Agendas
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34) __________ are specific, short-term, measurable results an organization wants to achieve in order to fulfill its long-term goals. A) Directives B) Opportunity targets C) Objectives D) Mission complements
35) A(n) __________ analysis is used to help companies evaluate their internal strengths and weaknesses, and develop an awareness of external threats and opportunities. A) WISH B) PERT C) ASSET D) SWOT
36) __________ planning determines the major goals of an organization and lays the foundation for obtaining and using resources to achieve those goals. A) Strategic B) Contingency C) Central D) Tactical
37) The type of planning that is concerned with developing detailed short-term actions about what is to be done, who is to do it, and how it is to be done is known as __________ planning.
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A) strategic B) contingency C) first-line D) tactical
38) __________ planning prepares alternative courses of action that may be used if the primary plans are not achieving objectives. A) Strategic B) Contingency C) Tactical D) Alternative
39)
Tactical planning is concerned with
A) determining the best way to cope with an emergency situation. B) developing detailed strategies about what is to be done, who is to do it, and how it is to be done. C) devising temporary courses of action to be used if the primary plans do not achieve the desired results. D) setting long-run goals that will govern the general course of the organization for years.
40) What is involved in setting work standards and schedules needed to implement the firm's tactical objectives? A) mission statement B) tactical planning C) operational planning D) contingency planning
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41) A(n) __________ would be used by a department manager as a tool for making daily and weekly assignments. A) operational plan B) vision statement C) mission statement D) tactical plan
42) Strategic planning looks at the organization as a whole, while __________ planning focuses on daily tasks and decisions. A) tactical B) contingency C) mission D) operational
43) __________ planning is a part of contingency planning that is used to deal with sudden and unexpected changes in the business environment. A) Crisis B) Tactical C) Operational D) SWOT
44)
__________ is choosing among two or more alternatives. A) Contingency planning B) Decision making C) Organizational selection D) Utility analysis
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45)
The first step in the rational decision-making model is to A) recruit team members to work on the problem. B) gather data. C) develop alternative responses. D) define the situation.
46) __________ is a problem-solving technique that attempts to come up with as many solutions as possible in a short time without censoring the ideas. A) Brainstorming B) Game theory C) SWOT analysis D) PMI
47)
PMI is a
A) computer program used to help managers write mission statements. B) statistical technique used in the controlling process. C) problem-solving technique used to evaluate possible solutions to a problem. D) rule of thumb used to determine how many employees should be managed by any single manager.
48)
In a company in which an effective vision has been provided A) there is no need for tactical planning. B) the economic and competitive environments tend to be much more predictable. C) employees are likely to have a sense of purpose and a common set of values. D) goals and objectives are no longer needed.
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49)
A basic difference between goals and objectives is that goals are
A) precise, while objectives are vague. B) set by tactical plans, while objectives are set by strategic plans. C) set by middle management, while objectives are set by first-line managers. D) concerned with broad, long-term accomplishments, while objectives focus on specific short-term details.
50)
What would be a concern addressed in a strategic plan?
A) Should the firm make a long-term commitment to expand into new markets? B) Which specific jobs should be assigned to each employee? C) How much output should be produced this week in a given production facility? D) Which computer software package should the firm's human resources office use to manage the payroll?
51) Because economic and competitive environments frequently change, organizations should A) set a long-term plan and stick to it. B) develop contingency plans. C) save time and money by cutting back on planning. D) eliminate any long-term strategic plans, but devise short-term tactical plans and update them once a year.
52) What technique would a team of workers be most likely to use if they wanted to evaluate several possible solutions to a specific problem their company needs to solve?
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A) PERT B) social audit C) PMI D) MBO
53) Setting contingency plans in an organization is considered very important today mainly because A) managers have historically been poor tactical planners. B) the government can charge firms with unfair business practices if they do not have such plans. C) conditions change rapidly in today's economic and competitive environments. D) most employees and staff don't understand strategic planning, so they tend to rely more on contingency plans.
54)
When a firm makes use of SWOT analysis, one of its objectives is to A) identify the best employees to fill each position within the organization. B) set specific short-term performance standards for each department. C) evaluate the desirability of issuing stocks or bonds in the current financial climate. D) identify the things it does well as an organization and the things it needs to improve.
55) According to the box "Does AI Mean the End of Managers?", with robots having the capabilities to do a multitude of business tasks, why have machines not replaced most human jobs? A) Companies do not want to eliminate all jobs at once. B) Machines cannot do the jobs of humans, like recommend cancer cures or make banking decisions. C) There is a level of reasoning and strategy that only humans have the ability to do. D) Machines are only useful in manufacturing duties.
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56) Madelyn, the president and CEO of Anytime Accounting, has asked several of her managers and employees to help establish a statement to outline the fundamental purposes of their company. The result of this effort is likely to be a document known as a(n) A) payoff matrix. B) mission statement. C) tactical plan. D) organization chart.
57) Holden is part of a group of managers at Community Engineering examining whether the company should offer some significant new services that would increase business by appealing to a different group of potential clients. Holden's group is involved with A) contingency planning. B) operational planning. C) strategic planning. D) tactical planning.
58) Shira was hired by the Attune Corporation to take over as the new CEO. Her initial impression is that the company is disorderly, primarily because the employees do not have a sense of purpose or a common set of values. Shira's remarks suggest that she needs to provide a(n) __________ for Attune. A) vision B) contingency plan C) objective function D) corporate logo
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59) Customers at any Revival Repair Center see a framed statement prominently displayed near the front door. The plaque describes the company's fundamental purposes. In part, it states that "All Revival Repair Centers operate under the belief that every customer deserves good quality parts, fast and dependable service, and a fair price." The words on this plaque reflect the __________ of Revival. A) strategic plan B) mission statement C) corporate agenda D) corporate charter
60) As a manager with Tate Industries, part of Zach's job is to make specific short-term decisions about what his department must do to achieve Tate's long-term success. Zach is involved in A) strategic planning. B) contingency planning. C) tactical planning. D) complimentary planning.
61) Judith is a production line supervisor. She spends several hours each week creating specific employee work assignments and production schedules for the coming week so that the production department can meet its short-term production objectives. This suggests that a significant component of Judith's job involves A) strategic planning. B) contingency planning. C) tactical planning. D) operational planning.
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62) Sawyer has dreamed of setting up a graphic design company since he was in college. He always knew he wanted to work from home and he now had several leads for prospective customers. He also knew how much money he needed to make to cover his expenses. He had several ways to approach his new business including working by himself or taking on a partner. Both ways needed more thought to determine what each would involve. In terms of the rational decision-making model, Sawyer is now executing which step? A) defining the situation B) describing and collecting needed information C) developing alternatives D) determining if the decision was a good one
63) __________ is the management function that involves allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives. A) Controlling B) Outsourcing C) Organizing D) Coordinating
64) The level of management that is directly responsible for assigning specific jobs to workers and evaluating their daily performance is called A) primary management. B) middle management. C) supervisory management. D) secondary management.
65)
Middle managers are responsible for
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A) establishing the vision for the organization. B) assigning specific jobs and evaluating the daily performance of workers. C) devising the organization's strategic plan. D) developing tactical plans and controlling.
66) General and divisional managers, plant managers, and deans and department heads at colleges are classified as A) middle management. B) supervisory management. C) top management. D) nominal management.
67)
Supervisory managers spend most of their time on A) conceptual and financial skills. B) technical and human relations skills. C) strategic planning. D) external efforts such as meeting with stockholders and other stakeholders.
68) __________ skills involve a manager's ability to picture the organization as a whole and the relationships among its various parts. A) Creative B) Technical C) Conceptual D) Autonomic
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69) __________ skills include the ability to perform tasks of a specific department or job, such as selling (marketing) or bookkeeping (accounting). A) Conceptual B) Departmental C) Technical D) Tactical
70)
Leadership, coaching, and morale building are all part of a manager's __________ skills. A) technical B) theoretical C) empirical D) human relations
71) Although top managers most often possess __________ skills, they don’t use these skills as often as a supervisory manager would. A) technical B) conceptual C) human relations D) visionary
72) Which management position is responsible for getting the right information to other managers to enable them to make better decisions? A) Chief Executive Officer (CEO) B) Chief Financial Officer (CFO) C) Chief Planning Officer (CPO) D) Chief Information Officer (CIO)
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73) The further up the managerial ladder a person moves, the __________ his or her original job skills become. A) more important B) less important C) stronger D) more tactical
74)
A chief operating officer (COO) would be classified as part of a firm's A) supervisory management. B) middle management. C) top management. D) first-line management.
75) __________ involves recruiting, hiring, motivating, and retaining the best people available to accomplish the company's objectives. A) Directing B) Planning C) Leading D) Staffing
76) By comparing the types of skills used by managers at different levels within an organization, which statement is true?
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A) Top managers use mainly technical skills and middle and first-line managers use mostly conceptual skills. B) First-line managers use mainly technical and human relations skills, while top managers devote most of their time to activities involving human relations and conceptual skills. C) The types of skills used by managers do not change much from one level of management to another. D) The specific skills used at different levels of management do vary, but conceptual skills are the most important at all levels.
77) By completing the courses needed to obtain a college major in accounting, marketing, or some other field, a student can go a long way toward acquiring the __________ skills managers need to rise through the ranks of their area of specialization. A) autocratic B) technical C) human relations D) delegation
78)
Which individual is most likely to be involved in strategic planning? A) chief executive officer B) electrical shop supervisor C) budget analyst D) advertising manager
79) The box "So You Want to Be a Social Media Manager" reviews the requirements of this emerging management position. Which technical skill is most needed by an effective social media manager?
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A) strategic planning B) graphic and video design C) staff training and development D) accounting and finance
80) The box "So You Want to Be a Social Media Manager" indicates that social media and social media management have gained importance to companies because A) all effective managers must engage on social media. B) it has replaced all other forms of marketing. C) it has created a universal advertising channel. D) about 40% of the global population accesses social media.
81) Mala is responsible for hiring, motivating, and retaining the best employees for her organization. Mala is in charge of A) staffing. B) orienting. C) directing. D) facilitating.
82) Marius has worked for Conway Construction for over 10 years and was recently was promoted to the position of foreman. He is directly responsible for assigning various jobs to his work crew and evaluating their performance on a daily basis. Marius is now a member of A) top management. B) middle management. C) supervisory management. D) forward management.
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83) Pierre has been promoted to a first-line manager. Pierre's new position will require him to spend a lot of time A) developing strategic plans. B) evaluating the daily performance of workers. C) creating a vision for the company. D) providing information to stakeholders.
84) Joanna is a plant manager for Clarkson Industries Inc. Though she spends time performing all management functions, she is mostly tasked with tactical planning and controlling. Joanna’s position would be classified as part of Clarkson's A) top management. B) lateral management. C) supervisory management. D) middle management.
85) As a long-time employee of Precision Plumbing Components, Milan has been promoted to foreman. In his new position, Milan will rely on A) conceptual skills more than human relations skills. B) technical skills and human relations skills more than conceptual skills. C) technical skills and conceptual skills, but he won't really need any human relations skills. D) accounting and financial skills.
86) Li Wei is a department head at University Hospital. He spends most of his time training and coaching employees to perform their jobs more effectively and teaching other managers to be better leaders. Li Wei's job requires him to make full use of his
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A) technical skills. B) conceptual skills. C) orientation skills. D) human relations skills.
87) Armand plans on majoring in accounting because he is confident that an ability to read and interpret financial and accounting data is the way to get to the top in business. Armand seems to be concerned with developing his A) technical skills. B) verbal skills. C) qualitative skills. D) conceptual skills.
88) __________ involves creating a vision for others to follow, establishing corporate values and ethics, and transforming the way an organization does business so that it is more effective and efficient. A) Organizing B) Production management C) Tactical planning D) Leadership
89)
What is a defining quality of a leader? A) embraces change B) mainly concerned with tactical issues C) tend to do the work themselves rather than delegate it to others D) strives to maintain order and stability
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90) The __________ style of leadership is characterized by making managerial decisions without consulting others. A) autocratic B) participative C) free-rein D) democratic
91) Managers who listen to their subordinates and allow them to participate in decision making are using the __________ style of leadership. A) autocratic B) free-rein C) participative D) bureaucratic
92) A(n) __________ leader would set objectives and give employees a great deal of freedom to decide for themselves how to accomplish those objectives. A) free-rein B) autocratic C) boss-centered D) aristocratic
93)
A key to effective leadership is the ability to A) maintain order, stability, and control. B) communicate a vision and rally others around that vision. C) master the technical details of the jobs performed by subordinates. D) maintain an autocratic approach to dealing with others.
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94) __________ is the term used to describe giving workers the education and tools they need to assume additional decision-making powers. A) Energizing B) Directing C) Upgrading D) Enabling
95) __________ means giving employees the authority and responsibility to respond quickly to customer requests. A) Restructuring B) Delineating C) Empowerment D) Directing
96) In traditional organizations, __________ involves giving explicit instructions to workers, telling them what to do to meet the goals and objectives of the organization. A) directing B) organizing C) budgeting D) controlling
97) __________ is concerned with finding the right information and making that information accessible and understood by everyone in an organization.
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A) Mission management B) Human resource management C) Knowledge management D) Auditing
98)
The first step in developing a knowledge management system is to A) empower employees to make their own decisions and accept the consequences. B) obtain the necessary information system technologies. C) recognize that perfect information is readily available in all organizations. D) determine what knowledge is most important to the organization.
99)
One difference between managers and leaders is that A) managers are found in businesses while leaders operate in nonprofit organizations. B) managers work to achieve stability while leaders embrace change. C) managers use an autocratic approach while leaders embrace a democratic style. D) all employees can manage, but only top managers can lead.
100)
Which statement about effective leadership is the most accurate?
A) Effective leaders have the same personality traits. B) The most effective leadership style depends on who is being led and in what situation. C) The democratic style of leadership will almost always improve the effectiveness of the organization. D) One trait of effective managers is that they consistently maintain the same style of leadership.
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101) The "Making Ethical Decisions" box describes a dilemma facing a first-line manager. The dilemma revolves around what leadership issue? A) honesty B) embracing change C) communicating a vision D) goal setting
102)
Autocratic leadership is likely to be effective when A) subordinates are highly trained professionals. B) the organization faces an emergency situation. C) workers enjoy expressing their opinions and having a say in what is done. D) the manager is uncertain about the best strategy to pursue.
103)
Which statement about leadership styles is most accurate?
A) A manager should choose one style and use it consistently. B) Managers have no control over the leadership style they use. C) Effective managers often use a variety of leadership styles. D) Managers should always start with an autocratic style, but can gradually switch to a more democratic approach if workers earn their trust.
104) What best summarizes the type of leader future organizations are likely to need? In the future, organizations will need leaders who A) supply a vision, establish corporate values, and promote corporate ethics. B) provide the sense of stability and orderliness the organization needs to withstand the challenges posed by a changing environment. C) maintain a strong track record of focusing on the accomplishment of financial objectives. D) effectively use autocratic techniques to grow the company.
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105)
As firms make greater use of empowerment and teams, managers will find that they
A) should use the same techniques for directing employees that were used in the past. B) will need to closely supervise the teams to make sure they remain focused on the goals of the organization. C) will need to provide the teams with detailed instructions to give them a clear sense of direction. D) must become more like coaches and counselors than bosses.
106) When we think of successful music entertainment groups of the past 60 years, the Beatles almost always appear in the top 5! In the early days, the entertainment group's life cycle could have ended as so many other rock groups do—here today, gone tomorrow. The four musicians were definitely creative and passionate about their craft and genre of music. As the informal leader of the group, John Lennon __________ the others to make important compositional contributions. All four members had the opportunity to create musical compositions and receive copyright credit for their contributions. A) told B) directed C) empowered D) commanded
107) Zara, a CEO of a tech firm, encourages employees to discuss management issues with her and to work together to resolve those issues in a democratic manner. Which statement would Zara most likely make?
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A) The key to staying on top in a high-tech industry is not wasting time checking out what other firms do, but acting immediately on my directives. B) In a high-tech business, it is more important to invest in technology than to invest in people. C) The key to keeping talented employees loyal to the company is to use a participative management style and treat them with respect, value their ideas, give them the resources they need, and expect great things from them. D) Spending a lot of money to buy out competitors for their technology is likely to backfire, because our firm is a leader in technology development.
108) Well-known retired basketball coach Bob Knight was known for his emotional antics at Indiana University and Texas Tech. If you talk with Bob, he believes in total dedication from his team and total compliance to his style of coaching. It's "his way or the highway." Bob typifies the __________ style of leader. A) bureaucratic B) free-rein C) participative D) autocratic
109) Department heads at Southside Electronics usually make decisions after meeting with employees and seeking their ideas and suggestions. These department heads are making use of the __________ style of leadership. A) autocratic B) diplomatic C) participative D) directive
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110) At Nu-Age Solutions, the highly regarded research team relies on top management to provide its strategic direction. After that, researchers work on their own to develop new medications to satisfy customer needs and company profit objectives. Middle management at Nu-Age Solutions practices A) free-rein leadership. B) consultative leadership. C) directive leadership. D) autocratic leadership.
111) Recently, a senior software engineer complained that his boss was always in the command and control mode: "He doesn't trust us to make the right decision!" The boss rarely took the advice of his employees. There were occasions when productivity was hampered because he chose to do things only his way. Referring to leadership styles, this would best be described as A) free rein. B) democratic. C) participative. D) autocratic.
112) Last year, Creative Gaming had its most successful rollout of one of its first person games in the company's history. The CEO announced sales and profits had far exceeded company projections. He attributed the success to a flexible plan, which included good design, accurate product testing, and innovative marketing and sales tactics. In order to have good recall of the procedures that were put in place for this successful introduction, he has charged a team of managers to develop a(n) __________ system, so the company can avoid "reinventing the wheel." For future introductions, he wants to be able to recall what worked and what didn't work. A) information technology B) human relations management C) enablement management D) knowledge management
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113)
The first step in controlling consists of A) issuing orders and explaining routines. B) setting clear performance standards. C) establishing a clear chain of command. D) assigning workers to perform specific tasks.
114) In order for standards to be useful in the controlling process, they must have certain characteristics. One of these characteristics is that they must be A) nonspecific. B) redundant. C) large-scale. D) attainable.
115)
What should form the foundation of a firm's control system? A) accounting and finance B) marketing and production C) human resources and finance D) computing and production
116) __________ are units within an organization that receive services from other units within the organization. A) End users B) Internal customers C) Third-party distribution centers D) Profit centers
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117) __________ include dealers, who buy products to sell to others, and ultimate customers who buy products for their own personal use. A) Field units B) External customers C) Internal customers D) Distribution centers
118)
Which statement reflects a clear performance standard?
A) Bring about a significant improvement in the morale of all workers. B) Decrease the number of products rejected due to manufacturing defects by 10% over the next 6 months. C) Completely eliminate all customer complaints. D) Make assistants more efficient.
119) When establishing criteria to measure the success of a customer-oriented business, managers should A) limit their attention to financial measures such as profit and return on investment since these are the only objective and quantifiable measures available. B) focus most of their attention on measures of employee satisfaction, since without good employees the firm will not be competitive. C) focus primarily on financial measures, but pay some attention to nonfinancial concerns. D) recognize that, while financial measures are important and should be considered, the purpose of the firm is to satisfy both internal and external customers.
120) Diego spent two hours going over quality reports to figure out if his team is meeting quality standards he set for the current month. Diego's efforts are part of the __________ function of management.
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A) planning B) organizing C) directing D) controlling
121) Sun Jung is a sales manager for Sunshine Cosmetics. She told her team she expects each of them to increase their customer interactions by at least 5% in the next month. Sun Jung has set a(n) A) procedural policy. B) functional objective. C) policy guide. D) performance standard.
122) Aiden created his own restaurant equipment company five years ago. Until now, he has never worried about instituting a formal control system. Recently, he is facing more costconscious restaurant owners. He has decided that a formal control system is needed. The first step Aiden should take is to A) draw up a formal organization chart. B) talk to his banker to set financial goals. C) devise a set of clear performance standards. D) design an accident report form so that he can keep accurate records of all accidents that occur.
123) Innovative Recreation has established clear standards of performance for its next virtual reality mobile game that will require the player's ability to react quickly. After a substantial testing process, the results are compared to the previously established development standards. If necessary, the engineering team will fix the bugs before customers beta test the game. These activities are part of the __________ of management.
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A) organizing function B) control function C) leading function D) planning function
124) Della is a middle manager for her firm and just finished comparing the results of a promotional campaign with the company's outcome expectations. The next step in the control process is to A) monitor and record actual performance. B) set up contingency plans. C) communicate results and deviations with management and employees involved. D) establish discipline committees to decide on dismissals.
125) As a sales rep for an eyewear company, Lindsey frequently relies on the marketing department for information and materials. When using customer satisfaction to judge the success of their company, Lindsey's managers should A) ignore Lindsey's satisfaction, since she is an employee rather than a customer. B) take Lindsey's satisfaction into account, because customers can be internal as well as external. C) consider Lindsey's satisfaction, but place less emphasis on it than on the satisfaction of a stockholder, since she is an external customer. D) consider Lindsey's satisfaction only if she has worked in the same job for at least two years.
126) Amazon customers often find it helpful to read reviews for products they are considering purchasing. After ultimately making the purchase, the customer can go to Amazon and post his or her opinion of the recently purchased product. This strategy not only assists other customers with their decision making, it helps Amazon assess the products it sells. Which statement attests to the value of this service?
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A) This action provides for complete transparency of company financial performance. B) This action supports a key criterion of the control function: the measurement of customer satisfaction. C) This action provides for better tactical planning, particularly the budgeting process. D) This action allows the company to compare its performance standards against the competition.
127) Lauzy Fare left his position as senior vice president at Blue Skies Electronics a few weeks ago to become the new CEO of Idle Time Gaming. Before joining the new company, Lauzy spent time studying Idle Time's competitive position and talking to employees in all divisions and at all levels of the organization. Based on his findings, Lauzy believes that Idle Time has potential but also faces some serious challenges if it expects to grow. Lauzy found that when confronted by him, most of Idle Time's professional employees seemed almost afraid to express their opinions. He learned that Otto Craddick, the previous CEO and founder of the company, viewed himself as the boss, and, as such, micromanaged every aspect of the business. This discouraged employees from using their own initiative and ideas to solve problems. For example, Otto required sales and service representatives to get his approval before they made any major commitments to customers. Otto's policy prevented the organization from responding quickly to customer requests, so sales were lost. Unlike his predecessor, Lauzy believes it is important for sales and service personnel to be able to deal with many types of customer requests without needing approval from top management. He is confident that giving employees the authority and flexibility to deal with customers, and providing them with the training and resources to help them do so, will improve morale within the company, create customer satisfaction, and grow revenues. Lauzy also wants to make workers throughout the organization feel more appreciated. He plans to continue meeting with them on a regular basis to seek their advice. He hopes his work colleagues will eventually respond to his leadership style. He has already encouraged middle managers to get employees more involved in decision making, and has suggested some problemsolving techniques the managers could try. Although he thought that changing the rigidity of the company culture would be his first challenge at the new firm, Lauzy quickly realized that there were no standards in place to measure the progress of changes in internal morale, customer satisfaction, and profitability. He has asked managers in those departments to spend more time setting performance standards and then monitoring actual performance. Lauzy is confident that in a relatively short period of time internal changes will lead to good company performance. As a member of top management, Lauzy performs a variety of important tasks.
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127.1) Otto, the previous CEO at Idle Time Gaming, relied on a(n) __________ style of management. A) autocratic B) iconoclastic C) democratic D) free-rein
127.2)
Lauzy seems to prefer a(n) __________ style of leadership.
A) autocratic B) participative C) free-rein D) altruistic
127.3) Lauzy favors problem-solving techniques that allow teams of workers to freely identify and discuss possible solutions to a problem without having their ideas censored. What is a problem-solving technique that Lauzy is likely to suggest to his managers? A) SWOT analysis B) PERT analysis C) brainstorming D) controlling
127.4) Lauzy's decision to establish well-defined standards for monitoring performance means that he expects management to seriously engage in the __________ function of management.
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A) research and development B) knowledge management C) organizing D) controlling
127.5) Which statement best describes the relative importance of the various types of skills Lauzy will use to perform these tasks? The tasks Lauzy performs will require: A) only technical skills. B) mainly conceptual skills and human relations skills. C) only human relations skills. D) mainly technical skills and human relations skills.
128) The main job of modern managers is to watch over people to be sure they do what the manager asks of them. ⊚ true ⊚ false
129) The best way to get people to do what a manager wants is for the manager to reprimand those who don't do things correctly. ⊚ true ⊚ false
130)
Managers in progressive firms of all kinds tend to guide and motivate employees. ⊚ true ⊚ false
131)
Managers must earn the trust of their employees.
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⊚ ⊚
true false
132) A modern manager's main job is to issue orders, then follow up to make sure employees do as they were told. ⊚ true ⊚ false
133) Managers in progressive organizations tend to emphasize teamwork and cooperation rather than discipline and giving orders. ⊚ true ⊚ false
134) Despite all of the changes in the business environment, the basic way a manager performs his or her job has remained remarkably constant. ⊚ true ⊚ false
135) Given the lack of discipline and short attention spans of today's workers, modern managers must watch their workers closely, set strict rules, and vigorously enforce policies. ⊚ true ⊚ false
136) In most high-tech industries, the best way to respond quickly to rapid technological changes is to keep most authority and responsibility in the hands of a few key managers who provide precise, detailed directions to the workers. ⊚ true ⊚ false
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137) As employees today often know much more about technology and the technical aspects of their jobs than their managers do, progressive managers emphasize teamwork and cooperation as a strategy for getting work done. ⊚ true ⊚ false
138) Raymond is the general manager of a retail outlet. By emphasizing teamwork and acting in a role of coach rather than boss, Raymond is considered to be a modern manager. ⊚ true ⊚ false
139) Hannah is an office manager and consistently has to tell her employees what to do, watch over their tasks, and reprimand those who don't listen to her orders. Hannah is a modern manager. ⊚ true ⊚ false
140)
Managers make decisions about how to use organizational resources to accomplish goals. ⊚ true ⊚ false
141)
Financing is one of the four key functions of management. ⊚ true ⊚ false
142)
The four key management functions are planning, organizing, leading, and controlling.
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⊚ ⊚
true false
143) One trend of the leading management function is to empower employees, giving them as much freedom as possible to become self-directed and self-motivated. ⊚ true ⊚ false
144) Leading is the management function of designing the structure of the organization so that everyone can function together. ⊚ true ⊚ false
145) As a management function, the main focus of controlling is to keep complete and up-todate records of the organization's financial transactions for tax and regulatory purposes. ⊚ true ⊚ false
146) The management function that involves guiding, training, and motivating others to work toward the achievement of an organization's goals is called leading. ⊚ true ⊚ false
147) In many smaller firms the manager's role is to direct the employees, telling them exactly what to do. ⊚ true ⊚ false
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148) Planning is the function of management that includes anticipating future trends and determining the best strategies and tactics to achieve an organization's goals and objectives. ⊚ true ⊚ false
149) Planning is a key management function because other management functions depend on having a good plan. ⊚ true ⊚ false
150) Managers focus on making efficient use of their organization's human resources, but leave decisions about the efficient use of other resources such as buildings, machinery, and supplies to engineers and accountants. ⊚ true ⊚ false
151) Today's progressive organizations are designed around the needs of the customer. The idea is to organize systems to be responsive to customer needs. ⊚ true ⊚ false
152) Caroline has spent the last two hours going over customer surveys to see how well her company is achieving its goal of improving overall customer satisfaction. Caroline's efforts are an example of the controlling function of management. ⊚ true ⊚ false
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153) Yuji, a manager with Mini Motors Toy Company, just partook in a meeting that considered the future trends of the toy industry, and identified new challenges and opportunities for Mini Motors. Yuji's participation in this meeting was part of the organizing function of management. ⊚ true ⊚ false
154) Emmett is a no-nonsense boss. He believes the best way for an organization to achieve its goals is for workers to follow their boss's direct orders. Thus, he tells workers exactly what to do and how to do it. Emmett's approach is an example of directing. ⊚ true ⊚ false
155) Reagan is a manager of a medium-sized insurance company. She is currently involved in redesigning her department to ensure that employees and other resources can respond more quickly and efficiently to the needs of its customers. Reagan's efforts are part of the organizing function of management. ⊚ true ⊚ false
156)
Planning involves setting the organizational vision, goals, and objectives. ⊚ true ⊚ false
157) Progressive managers consider planning to be of little importance in today's rapidly changing business environment. ⊚ true ⊚ false
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158) Goals tend to be broad and focus on the long term while objectives tend to be specific and more short-term in their focus. ⊚ true ⊚ false
159) A vision is a detailed set of specific steps that a firm must take to achieve its short-run objectives. ⊚ true ⊚ false
160) A statement about why an organization exists and what it is trying to achieve is called the organization's directive. ⊚ true ⊚ false
161) A vision is the overall explanation of why an organization exists and where it is trying to head. ⊚ true ⊚ false
162) A vision gives the organization a sense of purpose and a set of values that unite employees toward a common destiny. ⊚ true ⊚ false
163)
A mission statement outlines the fundamental purposes of an organization. ⊚ true ⊚ false
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164)
Today, a mission statement should also address social responsibility. ⊚ true ⊚ false
165)
Goals are broad, long-term accomplishments an organization wants to achieve. ⊚ true ⊚ false
166) Goals are best developed and agreed to by management so that the workers can follow them. ⊚ true ⊚ false
167) Objectives should be expressed as broad, general principles rather than as specific shortterm results. ⊚ true ⊚ false
168) Continuous planning is not necessary, because plans that worked well in the past are likely to continue to work well in the future. ⊚ true ⊚ false
169)
Planning is a continuous process. ⊚ true ⊚ false
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170)
The SWOT analysis helps firms identify competitive threats and market opportunities. ⊚ true ⊚ false
171) An analysis of the business environment helps managers identify threats and opportunities that face their firm. ⊚ true ⊚ false
172) Strategic planning is now much easier than it used to be because managers have access to very reliable computerized forecasting tools. ⊚ true ⊚ false
173) Tactical planning deals with setting long-range goals, while strategic planning develops the specific strategies needed to achieve the organization's operational goals. ⊚ true ⊚ false
174)
Strategic planning determines the major goals of the organization. ⊚ true ⊚ false
175) Today's business environment changes so rapidly that strategic planning is becoming more difficult and subject to change. ⊚ true ⊚ false
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176) Managers or teams of managers at the lower levels of an organization normally develop strategic plans, but top managers do most of the tactical planning. ⊚ true ⊚ false
177) Contingency planning involves developing alternative courses of action to be used if the primary plans do not achieve the desired results. ⊚ true ⊚ false
178) Operational planning looks at the organization as a whole, while strategic planning focuses on specific departmental actions. ⊚ true ⊚ false
179) One example of tactical planning is setting annual budgets and deciding on other details and activities necessary to meet the organization's strategic objectives. ⊚ true ⊚ false
180) Many cities and businesses are now developing contingency plans to respond to potential terrorist attacks. ⊚ true ⊚ false
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181) Instead of creating detailed strategic plans, the leaders of market-based companies (companies that respond quickly to environmental changes) set flexible directions to allow for change and seize opportunities when they come. ⊚ true ⊚ false
182)
Decision making occurs in all management functions. ⊚ true ⊚ false
183)
The first step in the rational decision-making model is to identify alternative solutions. ⊚ true ⊚ false
184) The last step in the rational decision-making model is to determine whether the decision was a good one and follow up. ⊚ true ⊚ false
185)
One step in the rational decision-making model is to develop alternatives. ⊚ true ⊚ false
186) Brainstorming is coming up with as many solutions as possible in a short period of time with a focus toward not censoring anyone's ideas. ⊚ true ⊚ false
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187)
Problem-solving is more formal than using the rational decision-making model. ⊚ true ⊚ false
188) PMI is a problem-solving technique that involves listing pluses, minuses, and implications. ⊚ true ⊚ false
189) A mission statement should provide a detailed explanation of how a company will achieve its objectives. ⊚ true ⊚ false
190) The SWOT analysis focuses only on the internal activities of the firm, while a PERT analysis is used to review the external environment in which the firm operates. ⊚ true ⊚ false
191) Tactical planning involves making decisions about which customers to serve, what products or services to sell, and the geographic areas in which the firm will compete. ⊚ true ⊚ false
192) Contingency planning is most important in markets where conditions are relatively stable and market growth is predictable. ⊚ true ⊚ false
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193) In order to ensure effective implementation, managers should make only one set of plans and carefully follow them to ensure that the organization's objectives are achieved. ⊚ true ⊚ false
194) The box "Does AI Mean the End of Managers?" suggests that up to 70% of routine work now performed by managers could easily be completed using artificial intelligence. ⊚ true ⊚ false
195) Top managers at Trendaholic Clothing Stores found their employees do not really share a common sense of purpose nor do they have a common set of values. This suggests that top management has not provided a clear vision for the firm. ⊚ true ⊚ false
196) Cady is part of the top management team at Stormy Rain Gear, a company that produces umbrellas, raincoats, hats, and all-weather shoes. As a member of top management, Cady is more likely to be involved in strategic planning than in tactical planning. ⊚ true ⊚ false
197) Peeta is a manager at a nationwide retail chain. Each morning she determines the order in which store projects are performed; she sets work schedules for employees and standards that must be met. These activities suggest that Peeta is involved in operational planning. ⊚ true ⊚ false
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198) Whitney needed to solve a problem fast! She called together her department team and asked them to list as many possible solutions as they could come up with in a short period of time. During the process she encouraged responses and avoided censoring what her workers said. Whitney is utilizing a problem-solving technique known as brainstorming. ⊚ true ⊚ false
199) After management has created a plan of action, the focus turns to the controlling function to recheck and often redo the plan. ⊚ true ⊚ false
200) Organizing involves allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives. ⊚ true ⊚ false
201)
Branch and plant managers and division heads are classified as first-line managers. ⊚ true ⊚ false
202) A CEO is often the president of the firm and is responsible for developing the strategic plans. ⊚ true ⊚ false
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203) Firms have eliminated many middle managers, giving the remaining managers more employees to supervise. ⊚ true ⊚ false
204) Supervisory managers are those who directly oversee the activities of workers and evaluate their daily performance. ⊚ true ⊚ false
205)
Middle managers usually are responsible for tactical planning and controlling. ⊚ true ⊚ false
206)
The CIO, COO, and CFO are classified as top management positions. ⊚ true ⊚ false
207) In this day of rapidly changing technology, technical skills are the most important skills for all levels of management. ⊚ true ⊚ false
208) Conceptual skills refer to the ability of a manager to perform the tasks associated with a specific discipline or department. ⊚ true ⊚ false
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209) First-line managers typically spend less time on conceptual tasks and more time on technical skills. ⊚ true ⊚ false
210)
Most of a top manager's time is devoted to conceptual and human relations activities. ⊚ true ⊚ false
211) The abilities to plan, coordinate, and delegate are among a manager's most basic technical skills. ⊚ true ⊚ false
212) A person who is a good first-line manager is automatically likely to be a good middle or top manager. ⊚ true ⊚ false
213) Human relations skills include those associated with leadership, coaching, morale building, and supportiveness. ⊚ true ⊚ false
214) The question of how to implement change within an organization is the responsibility of the firm's CEO. ⊚ true ⊚ false
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215) Staffing involves recruiting, hiring, motivating, and retaining the best people available for the organization. ⊚ true ⊚ false
216)
Due to the growth of the Internet, recruiting is less important today than in the past. ⊚ true ⊚ false
217)
Staffing is a less important management function today than in the past. ⊚ true ⊚ false
218) Organizing involves developing a structure or framework that relates all workers, tasks, and resources to each other. ⊚ true ⊚ false
219) Top management is also known as first-line management because it deals with key managerial decisions on a priority basis. ⊚ true ⊚ false
220)
Supervisory managers usually work more with ideas than with people. ⊚ true ⊚ false
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221) Because of the complex nature of their jobs, top managers spend most of their time developing and using technical skills. ⊚ true ⊚ false
222) The experience gained by first-line managers as they perform their jobs enables them to acquire all the skills they will need when promoted to higher levels of management. ⊚ true ⊚ false
223) The "So You Want to Be a Social Media Manager" feature in the "Connecting through Social Media" box states that knowledge of behavioral psychology and budgeting are important for modern social media managers. ⊚ true ⊚ false
224) Drew is a manager for Bullseye Cable. Most of his day is spent scheduling the specific service calls that each employee performs, verifying job completion, and evaluating employee performance on each call. These responsibilities suggest that Drew is a middle manager. ⊚ true ⊚ false
225) Shelby is a first-line manager at her company. At this level of management, she will use human relations and conceptual skills as well as technical skills. ⊚ true ⊚ false
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226) Sydney was recently promoted to first-line manager. Her company is very traditional in its approach to management. In her position, Sydney probably spends a lot of time giving employees detailed and specific instructions. ⊚ true ⊚ false
227) Ricardo wants to become a manager, but he is reserved and avoids conversation with strangers. However, he is very comfortable with information technology and has great technical skills in the area. Ricardo's personal traits make him a good candidate for a top management position. ⊚ true ⊚ false
228) Staffing is less important at Facebook, Google, and other high-tech firms because these firms sell technology. ⊚ true ⊚ false
229)
People who are good leaders also are almost always good managers. ⊚ true ⊚ false
230) Leadership is the management function of checking to determine whether or not an organization is progressing toward its objectives, and taking corrective action if it is not. ⊚ true ⊚ false
231) One difference between managers and leaders is that managers strive to achieve stability while leaders embrace change.
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⊚ ⊚
232)
true false
Management carries out of the vision created by leadership. ⊚ true ⊚ false
233) Effective leadership includes the ability both to welcome change and to promote ethical behavior. ⊚ true ⊚ false
234) Good leaders motivate workers and create the environment for workers to motivate themselves. ⊚ true ⊚ false
235)
Successful leaders influence the actions of others. ⊚ true ⊚ false
236) A leader's most important job may be to transform the way the company does business so that it is more effective and efficient. ⊚ true ⊚ false
237)
Researchers have determined that all effective leaders have similar traits.
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⊚ ⊚
238)
true false
There is no single leadership style that works best in all situations. ⊚ true ⊚ false
239) Research has shown that the democratic style of leadership is the most effective style of leadership. ⊚ true ⊚ false
240) Research on leadership supports the idea that the best leadership style depends on several factors, including the people being led and the situation. ⊚ true ⊚ false
241)
The autocratic style of leadership can be very effective in emergency situations. ⊚ true ⊚ false
242)
The traits used by autocratic leaders include warmth, friendliness, and collaboration. ⊚ true ⊚ false
243) The traits that characterize participative leaders include flexibility, good listening skills, and empathy.
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⊚ ⊚
true false
244) Autocratic leadership is most effective with workers who like to work independently and make their own decisions. ⊚ true ⊚ false
245) Research has shown that employee participation in decision making improves job satisfaction. ⊚ true ⊚ false
246) Free-rein leaders tend to carefully monitor their subordinates to make sure they are doing the job in the correct way. ⊚ true ⊚ false
247) Managers are most effective when they consistently use the same leadership style with every employee assigned to their work group. ⊚ true ⊚ false
248) In traditional organizations, directing includes both giving assignments to workers and providing feedback on their performance. ⊚ true ⊚ false
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249)
Empowerment means that more authority and responsibility is given to top management. ⊚ true ⊚ false
250) Enabling is the term used to describe the process by which employees recognize and respect the authority of managers to issue orders. ⊚ true ⊚ false
251) Knowledge management involves finding the right information, keeping the information accessible, and making the information known to everyone in the firm. ⊚ true ⊚ false
252) The focus of knowledge management is to make sure top managers have all of the information they need to run the company. ⊚ true ⊚ false
253) The first step to developing a knowledge management system is to develop the technology to keep information secure. ⊚ true ⊚ false
254) The amount of data gathered has grown so much that the term big data is used to describe the vast amount of information available. ⊚ true ⊚ false
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255) A comparison of leadership and management suggests that leadership is about creating a vision, while management is about carrying out that vision. ⊚ true ⊚ false
256) Barb wants to ensure she maintains and preserves order and stability in her company. She is very good at developing tactical plans to achieve her company's goals and objectives. These characteristics suggest that Barb has characteristics of an exceptional leader. ⊚ true ⊚ false
257) Howard is a manager for a major manufacturing corporation. He strives to maintain a free-rein approach to leadership in most situations. However, the company recently lost a major contract that it needs to continue the current level of operation. Management needs to take quick action to adjust, including slashing expenses. Under these conditions, Howard should maintain his free-rein style of leadership. ⊚ true ⊚ false
258) Raj is quick and decisive. He makes most decisions by himself, issues orders, and expects his subordinates to follow them without question. Raj's behavior is an example of the free-rein style of leadership. ⊚ true ⊚ false
259) After assessing the results from a recent customer survey, top managers at Pivotal Corporation are convinced their firm is doing a poor job of responding quickly to customer needs. This has the managers very worried. Empowerment might be an approach that would help Pivotal improve its responsiveness.
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⊚ ⊚
true false
260) Nhung is the project manager for a team of experienced and creative programmers at a popular games developer. Since the team members are bright, creative, and highly motivated, Nhung brainstorms basic ideas with her group, then allows the programmers a great deal of freedom to do what it takes to reach the agreed-upon objectives. Nhung is using a free-rein leadership style. ⊚ true ⊚ false
261) Thelma has worked for the Country Rose Inn for a decade. Sean, however, is a new employee at the hotel. Daria, who oversees both Thelma and Sean, may find that she should use a different leadership style with each of these employees. ⊚ true ⊚ false
262) Bernard is a department chair at a local university. He always gives department faculty members a chance to express their opinions and encourages them to participate in decision making. Employees who work with Bernard are likely to have a high level of job satisfaction. ⊚ true ⊚ false
263) Joe is a middle manager at Masters Inc. The company's top management has just announced that they are going to initiate a policy of empowerment. In order for this policy to succeed, Joe and other managers will need to adopt a more autocratic style of leadership. ⊚ true ⊚ false
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264) The steps of the controlling function include assigning tasks and establishing procedures to accomplish organizational goals. ⊚ true ⊚ false
265) Controlling provides managers and workers with feedback that helps them adjust to deviations from plans. ⊚ true ⊚ false
266) If managers do a good job planning and organizing, there shouldn't be a need for them to be involved with controlling. ⊚ true ⊚ false
267) Two of the key components of the control process are setting clear performance standards and communicating results and deviations to the employees involved. ⊚ true ⊚ false
268)
The first step in the controlling process is to monitor and record the actual results. ⊚ true ⊚ false
269)
Without clear standards, the control process is impossible to implement. ⊚ true ⊚ false
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270) In the control process, performance standards should be stated in general terms in order to give management as much flexibility as possible. ⊚ true ⊚ false
271) In order to be effective, performance standards must be specific, attainable, and measurable. ⊚ true ⊚ false
272) Accounting and finance are important for control systems because they provide the numbers management needs to evaluate progress. ⊚ true ⊚ false
273) External customers are those individuals or units that receive services from other units within the same organization. ⊚ true ⊚ false
274)
A customer-oriented firm should focus exclusively on satisfying its internal customers. ⊚ true ⊚ false
275) When all is said and done, financial standards such as profit and return on investment are the only relevant measures of how well a firm is meeting its goals. ⊚ true ⊚ false
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276) When setting standards used in controlling, it is better to simply state general goals such as "better quality" or "higher levels of consumer satisfaction" than it is to spend a lot of time and effort developing more specific standards. ⊚ true ⊚ false
277) Jose is a manager for a firm that designs and manufactures greeting cards, invitations, announcements, and other event material. Jose spends a lot of his time trying to find the right people for various positions at his company. These efforts are part of the controlling function of management. ⊚ true ⊚ false
278) Alexis is concerned about the number of customer complaints she has received regarding the poor service provided by her department. She is convinced her employees are able to provide better service and cut complaints significantly. Alexis has set a new goal for her department to reduce customer complaints by 15% within six months. This goal is an example of the type of performance standard needed for effective controlling. ⊚ true ⊚ false
279) Performance Fit, a popular maker of men's and women's athletic wear, has just reported a record profit. This proves that the firm is successfully achieving its goals. ⊚ true ⊚ false
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Answer Key Test name: chapter 7 7) B 8) C 9) B 10) D 11) D 12) B 13) D 14) A 15) C 16) D 17) B 18) B 19) C 20) B 21) A 22) B 23) D 24) B 25) C 26) C 27) A 28) D 29) A 30) B 31) C 32) B
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33) A 34) C 35) D 36) A 37) D 38) B 39) B 40) C 41) A 42) D 43) A 44) B 45) D 46) A 47) C 48) C 49) D 50) A 51) B 52) C 53) C 54) D 55) C 56) B 57) C 58) A 59) B 60) C 61) D 62) C
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63) C 64) C 65) D 66) A 67) B 68) C 69) C 70) D 71) A 72) D 73) B 74) C 75) D 76) B 77) B 78) A 79) B 80) D 81) A 82) C 83) B 84) D 85) B 86) D 87) A 88) D 89) A 90) A 91) C 92) A
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93) B 94) D 95) C 96) A 97) C 98) D 99) B 100) B 101) A 102) B 103) C 104) A 105) D 106) C 107) C 108) D 109) C 110) A 111) D 112) D 113) B 114) D 115) A 116) B 117) B 118) B 119) D 120) D 121) D 122) C
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Discuss Max Weber's views on organization theory.
2) What is a matrix organization? What advantages and disadvantages are associated with this type of organization?
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3) What is a cross-functional, self-managed team? Who would serve on such teams? Why do cross-functional, self-managed teams often lead to networking?
4)
Describe two major issues that are important in organizational design.
5) Explain the difference between a firm's formal organization and its informal organization. Why are both types of organization important to managers?
6)
Organizing a business begins with A) acquiring the necessary resources. B) choosing the best qualified employees. C) developing an efficient plan of action. D) determining the work to be done.
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7)
Dividing the required work among a group of employees is called A) departmentalization. B) informal organization. C) division of labor. D) separation of control.
8)
Dividing tasks into smaller jobs is called A) job enrichment. B) job specialization. C) departmentalization. D) division of authority.
9) The process of setting up individual functional units of the business to do specialized tasks is called A) departmentalization. B) division of labor. C) job specialization. D) delegation of authority.
10)
Job specialization is known to A) minimize delegated authority and responsibility. B) improve job performance. C) create work teams and improve resource allocation. D) establish procedures.
11)
What is an example of a move to reorganize?
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A) reducing the labor force within your business B) revising plans by creating contingency plans C) managing by objectives and clearing pathways for success D) developing a way to monitor financial success
12)
The proven success of job specialization lies in the fact that
A) it leads to groupthink. B) it avoids the pitfalls of division of labor, where workers become removed from thinking conceptually about the business. C) it is a detractor to others who are thinking about entering your industry because it successfully creates barriers to entry. D) it adds efficiency to the business's operation by identifying tasks that some do better than others.
13) In the "Making Ethical Decisions" box titled "Would You Sacrifice Safety for Profits?", which statement best expresses the theme of the discussion? A) In the beginning, company procedures that require value judgments are often too costly. As the business grows, the owner can add ethical procedures to each job. B) The principles of organization state that the only company objective is to gain profits for the owner(s) or stockholders. If your competitors are cutting corners with safety regulations, you should consider the same. C) The only way to be profitable is to avoid risk. If new safety equipment becomes available that is applicable to your business, even if it slows productivity, you should adopt it. D) The corporate culture you create as you begin your service will last a long time. Your workers will adopt your values.
14) As Mavis gets ready to open her new business, she has identified the tasks that need to be accomplished and has assigned employees to each task. This illustrates
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A) management departmentalization. B) division of labor. C) specialization of priorities. D) mass production economies.
15) To better organize his lawncare business, Doug is dividing each job into several parts. Erik is the fastest on the riding mower, Seth can rake up every tiny piece left on the lawn, and Tyrell is a master edger. If he assigns employees to their best strength, what would this action exemplify? A) job specialization B) departmentalization C) delegation of authority D) economies of scale
16) The concept of __________ suggests that as a firm produces more, the average cost of goods produced goes down. A) natural growth B) survival of the fittest C) cost enhancement D) economies of scale
17)
Henri Fayol and Max Weber are best known for their contributions to A) production theory. B) marketing theory. C) organization theory. D) finance theory.
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18)
Organization theorists emerged during the era of mass production, meaning
A) the development of ways to produce a large quantity of product efficiently. B) the development of ways to purchase raw materials in bulk. C) the decline in the cost of production due to an increase in the cottage industry. D) the era when most companies adopted very similar methods of producing goods and services, which led to standardization of organizational design.
19) Fayol's __________ principle states that each worker should report to one, and only one, boss. A) division of labor B) unity of command C) esprit de corps D) comparative advantage
20) Fayol's __________ principle says that tasks should be divided into areas of specialization. A) departmentalization B) comparative advantage C) division of labor D) centralization
21) Fayol's __________ principle says that workers' attitudes can create an environment of pride and loyalty within an organization.
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A) esprit de corps B) hierarchy of loyalty C) unity of command D) equity
22) __________ believed that managers were trustworthy and companies would do well if employees simply did what they were told. A) John Keynes B) Adam Smith C) Peter Drucker D) Max Weber
23) Max Weber used the term __________ to describe middle managers whose job was to implement the orders of top management. A) management B) autocrats C) staff personnel D) bureaucrats
24) A(n) __________ is a visual device that shows relationships among people and divides the organization's work. A) organization chart B) Venn diagram C) corporate plan D) Gantt chart
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25)
In Weber's view of a bureaucratic organization, the role of top management is to A) empower workers and enable them to quickly respond to customer wants. B) make decisions. C) develop the rules and procedures needed to carry out the plans of bureaucrats. D) directly supervise front-line employees to better control operations.
26)
In Weber's view of a bureaucratic organization, the organization demands A) a spirit of pride and loyalty among the workers. B) cross-functional teams. C) clearly established rules and guidelines that are to be precisely followed. D) self-managed teams.
27) the
The line of authority that moves from the top of a hierarchy to the lowest level is called
A) chain of logic. B) chain of command. C) organizational design. D) delegation of contingent authority.
28) A(n) __________ consists of one person at the top of the organization and many levels of managers who are responsible to that person. A) hierarchy B) oligarchy C) inverted organization D) informal organization
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29) A(n) __________ is used by an organization to show who is accountable for the completion of specific work and who reports to whom. A) balance sheet B) Venn diagram C) stakeholder outline D) organization chart
30)
What statement reflects Weber's view of bureaucratic organizations? A) Departments communicate with each other on a regular basis. B) Employees follow strict rules and regulations. C) Customer satisfaction is the number one priority. D) First-line workers are empowered to respond to the needs of customers.
31)
One feature of a bureaucratic organization is that A) it is very responsive to the wants and needs of customers. B) there are very few layers of management. C) it encourages cooperation among different departments within the organization. D) employees know they are expected to follow the rules and regulations.
32) __________ organizations are characterized by many layers of management and function with well-defined rules and procedures. A) Matrix B) Inverted C) Centralized D) Bureaucratic
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33)
When are economies of scale most achievable? A) when front-line workers are empowered to make decisions B) when a firm reduces its average cost of production as it produces more C) when firms purchase supplies and raw materials in small quantities D) when production remains steady
34)
Max Weber favored which organizational principle? A) inverted organizations B) worker participation in decision making C) staffing and promotions based on qualifications D) flat organizations
35) Fayol believed that decision-making authority should remain in the hands of top management A) in small organizations, but should be delegated to middle and first-line managers in large organizations. B) in large organizations, but could be delegated to middle and first-line managers in small organizations. C) in all types and sizes of organizations. D) only in organizations subjected to significant government regulation.
36)
Which statement explains the unity of command principle of management?
A) All workers must share the same goal. B) Every firm has one strong leader, and everyone should support that individual. C) Workers can become frustrated and confused if they have more than one boss. D) All authority should rest with top management, since only top managers carry the responsibility of bad decisions.
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37)
If companies follow the theories of Fayol and Weber, which scenario is likely to result?
A) Organization design will benefit by the emergence of quick decision making. B) Organization design will eliminate systems of hierarchy and chains of command due to their hindrance of esprit de corps. C) Organizations that grow will develop several layers of management and the time that it takes to make and carry out a decision will increase. D) There will be a significant reduction of the workforce due to specialization and departmentalization.
38) Which statement most closely identifies the problem with adopting Fayol's principles of organization design for contemporary businesses? A) Leaving some decision-making power to middle management minimizes the effort and results that management would put into the other historical principles of organization. B) These principles create organizations that don't respond quickly to customer needs. C) The principles of Fayol and Weber hamper a firm's ability to determine if it is profitable. D) Authority and responsibility quickly become unrelated.
39) Which statement would best summarize Max Weber's views on the role of workers in an organization? A) Workers should be empowered to do whatever it takes to satisfy the needs of customers. B) Workers will be promoted within the organization depending upon "who they know," rather than "what they know." C) Workers should simply follow well-defined procedures. D) Workers are an important creative resource for a firm, and top management should listen to their ideas.
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40) According to Max Weber's views on bureaucratic organizations, as a middle manager at a bureaucratic company, your function would be to A) make key operating decisions. B) suggest improvements for your own staff and department. C) ensure the organization achieves esprit de corps. D) implement the decisions of top management.
41) At All-Pro Fencing, ten employees perform various aspects of the company's work. Two people are in sales; four perform installation; one purchases materials; one does billing; two perform after-sales inspections. This type of organization reflects Fayol's principle of A) division of labor. B) equity. C) unity of command. D) hierarchy of authority.
42) Rae, a designer for a business that installs underground sprinkler systems for residential and commercial customers, is experiencing some frustration. She has two bosses, Bill and Bailey, who both share the ownership responsibilities of the business. While Bill is in charge of commercial accounts, Bailey is in charge of residential accounts. Sometimes, however, Bill and Bailey double book Rae's time, creating irritations and animosity. Since they share managerial responsibility, there is no clear way to decide whose accounts are most important. This type of situation represents a violation of Fayol's principle of A) division of labor. B) order. C) clear communication channels. D) unity of command.
43) Lincoln, a bank financial manager, always attempts to treat each subordinate with respect and fairness. Lincoln's treatment of employees is an example of Fayol's principle of
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A) unity of command. B) equity. C) empowerment. D) order.
44) Suri recently took a job in the marketing department for All Access Cable Company. After just a few days on the job, Suri learned that the company has many layers of management, and seems to have a rule to cover almost every situation. These conditions suggest that All Access Cable is a(n) A) cross-functional organization. B) decentralized organization. C) oligopolistic organization. D) bureaucratic organization.
45) When Milo opened his auto body shop, his business plan included a(n) __________ that showed the relationships among employees in his organization and the lines of authority and responsibility. A) business view map B) department categorization C) organization chart D) operating matrix grid
46) Jefferson County Community College is a multi-district college with four campuses. Each campus has one president, two vice presidents, five deans, 12 department chairs, over 100 faculty members, and several persons in support roles. The presidents from each campus report to four vice chancellors and the vice chancellors report to the chancellor. It is clear that Jefferson County Community College has a well-defined
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A) academic culture. B) chain of command. C) esprit de corps. D) financial structure.
47) Addie's company is a bureaucratic organization. Addie is likely to encounter which condition? A) real-time decisions B) cross-functional teams C) empowerment of first-line employees to better serve customers D) many layers of management
48) Sampson Enterprise's management works hard to ensure that nobody in its organization has more than one boss and all workers are treated with fairness and respect. Additionally, work is divided into areas of specialization so that everyone knows to whom they should report. The management of Sampson reflects the ideas and principles of A) John M. Keynes. B) Peter Drucker. C) Karl Marx. D) Henri Fayol.
49) As a manager of a small clothing store, Apollo favors detailed job descriptions, formal rules and regulations, thorough records, and standardized procedures. He also believes that staffing and promotion decisions should be based strictly on the qualifications of the people under consideration. Apollo's attitudes suggest that he is strongly influenced by the ideas of
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A) Thomas Piketty. B) Max Weber. C) Karl Marx. D) Adam Smith.
50)
What determines the degree of decentralization of a firm?
A) the degree to which lower-level management is empowered to make decisions B) the chain of command used to follow the flow of authority from top of the hierarchy to the lowest levels C) the geographical area served by the firm's operations D) the degree of product standardization desired by the marketplace
51) In a(n) __________ organization, decision-making authority is concentrated at the top level of management. A) bottom-up B) decentralized C) inverted D) centralized
52) __________ means that decision-making authority is delegated to lower-level managers and employees. A) Uniformity of authority B) Decentralized authority C) Centralized authority D) Standardized authority
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53)
The optimum number of subordinates a manager can supervise is referred to as the A) manager-subordinate ratio. B) chain of command. C) employee quota. D) span of control.
54)
The span of control for a manager
A) should never exceed seven subordinates. B) is no longer a relevant issue in today's computerized offices. C) depends on a number of factors, and can vary from one manager to another. D) varies somewhat from manager to manager, but most managers operate best with a span of control of about nine employees.
55) Due to more emphasis on empowerment and more talented and better-educated lowerlevel management, span of control in organizations has A) increased. B) decreased. C) become an obsolete term in organization design. D) led to tall organizations.
56) An organization that consists of many layers of management is referred to as a(n) __________ organization. A) flat B) wide C) tall D) deep
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57)
The __________ an organization's structure, the __________ the span of control. A) flatter; wider B) flatter; narrower C) taller; wider D) taller; flatter
58)
An organization with only a few layers of management is known as a(n) A) tall organization. B) flat organization. C) leveraged organization. D) coordinated organization.
59) The trend today is for large organizations to improve their efficiency in communication and decision making by A) creating specific rules for everyone to follow. B) eliminating several layers of management. C) restructuring into a bureaucratic organization. D) reducing the span of control for managers.
60) __________ refers to the process of dividing organizational functions (sales, production, accounting/bookkeeping) into separate units. A) Coordination B) Decentralization C) Empowerment D) Departmentalization
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61)
The traditional technique used to departmentalize an organization is by A) function. B) customer group. C) geographic area. D) production process.
62)
What is considered to be a disadvantage of functional departmentalization? A) There may be a lack of communication among the different departments. B) Employees cannot develop skills in depth. C) The company is unable to achieve economies of scale. D) Top management cannot direct and control department activities.
63)
What is considered to be an advantage of functional departmentalization?
A) Employees begin to identify with their department and its goals rather than with the goals of the entire organization. B) People in the same department begin to think very differently. C) Departments are isolated from one another. D) Employee skills can be developed in depth.
64)
Which factor helps determine a manager's span of control? A) the number of global competitors B) the level of standardization of the work to be done C) method of accounting for production D) form of business ownership
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65) Organizations that require consistent production standards to help create a high-quality public image would tend to favor A) centralized authority. B) an inverted organization. C) a high level of employee empowerment. D) flat organizational structures.
66) Today's preference for flat rather than tall organization structures is mainly due to a flat organization's ability to A) encourage esprit de corps among employees in various departments. B) increase the cost of labor through economies of scale. C) respond quickly to customer demands. D) increase sales through multiple customer contacts by several layers of management.
67) Within its production department, Wilderness Manufacturing has shift leaders, supervisors, assistant plant managers, plant managers, product group managers, assistant division managers, division managers, an assistant vice president for production, and a vice president in charge of production. Given its multiple-layer management structure, Wilderness Manufacturing is an example of a(n) __________ organization. A) tall B) wide C) cross-functional D) decentralized
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68) Klein's Garden Centers is a chain of discount gardening stores throughout the United States. Top management realizes that among the different regions of the United States, there are vastly different climates and soil conditions. Therefore, regional managers are given a great deal of freedom to decide exactly what types of plants, fertilizers, and other items to stock and how to best market these products. Klein's is an example of a __________ organization. A) bureaucratic B) top-down C) hierarchical D) decentralized
69) Vector Furniture Company assigns workers to departments based on similar skills. Currently, the company has a marketing department, a production department, a finance department, and a human resources department. This suggests that Vector departmentalizes by A) process. B) function. C) user group. D) location.
70) Smart Safe Industries manufactures a multitude of safety products like burglar alarms, smoke detectors, surveillance cameras, and specialty locks. Smart Safe doesn't just stick to households, they outfit businesses and government agencies as well. They have found that each market requires a different marketing strategy. Smart Safe would probably benefit from departmentalization by A) function. B) process. C) customer type. D) market opportunities.
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71) As the head of the engineering department for her company, Prisha works with her team on complex and challenging projects. The level of detail in this work requires Prisha to spend a significant amount of time with each team member, providing advice and support. Due to the complexity and time involvement of each project, Prisha has a(n) __________ span of control. A) wide B) narrow C) unlimited D) functional
72) Pathways Studios organizes its jobs by activity, such as production, marketing, accounting, and finance. Pathways Studios applies __________ departmentalization in order to maximize their efficiency. A) product B) customer C) functional D) standardized
73) Merchants Bank organizes its loan operations based on the market served—consumer, small business, or nonprofit organizations. Departmentalization based on __________ allows Merchants to better serve borrowers with different needs. A) function B) geography C) process D) customer group
74) Franklin Corporation has seen rapid growth during its first five years. While still relatively small, Franklin is now big enough that Ron, the firm's CEO, has decided to organize the firm into functional departments. Ron can likely expect what to occur?
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A) quick company response to a change in the business environment B) excellent communications between different departments C) increase in scope of the performance of functions D) opportunities for employees to develop their skills in depth
75) Waverly Conference Centers, a national chain of professional event centers, utilizes a centralized authority structure. Which statement provides the most likely explanation for why management at Waverly would favor centralized authority? A) Top management at Waverly intends to empower its first-line employees. B) Top management at Waverly wants to improve customer service response time. C) Top management desires to maintain a uniform image and high-quality service. D) IICC wants to utilize a cross-functional organization.
76) Vista Components has found it needs to reorganize, including a significant trim of its middle management. This action will likely result in A) acquiring additional firms. B) flattening the organization and empowering employees, allowing them to get closer to the customer. C) increasing the size of its traditional departments to handle third shift operations. D) centralizing its decision making to better control its quality.
77) The marketing department manager at Kearney Consulting made a strong push to hire professionals with superior performance records in prior jobs. It didn't take long for these enthusiastic marketers to recognize the many talents within their department. They admired how alike they were and how they seemed to agree with each other's work styles and ideas. After a while, it became difficult for others in the organization to present to this group. If the idea did not originate within the marketing team, marketers did not give it much credence. This phenomenon is called
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A) departmentalization clique. B) interoffice flattening. C) inverting. D) groupthink.
78) Management at Lotus Grill, a nationwide vegetarian restaurant chain, believes that its customers value a predictable and consistent level of service and quality. When customers stop at one of its restaurants anywhere in the United States, they should know what to expect in terms of menu, price and quality. In order to maintain this consistency, Lotus Grill adopted a(n) __________ structure. A) centralized authority B) decentralized authority C) hybrid authority D) regional authority
79) A __________ organization is characterized by direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor. A) matrix B) cross-functional C) line D) line-and-staff
80)
__________ are responsible for directly achieving organizational goals. A) Organizational specialists B) Line personnel C) Chain of command managers D) Staff personnel
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81)
Employees who perform functions that advise and assist line personnel are known as A) middle managers. B) empowered workers. C) secondary employees. D) staff personnel.
82)
Which organization model follows all of Fayol's traditional management rules? A) line organization B) line-and-staff organization C) cross-functional team D) matrix
83)
Staff positions in an organization A) support and assist the line positions. B) are superior to line positions. C) are less well-paid than line positions. D) consist of all top management.
84) In a __________ organization, specialists from different parts of the organization are brought together on a temporary basis to work on specific projects. A) matrix B) line C) line-and-staff D) centralized
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85)
Line-and-staff organizations work well in organizations with A) operations in high-growth industries. B) stiff competition. C) short product life cycles. D) a relatively unchanging environment.
86)
Matrix organizational structures were first developed in A) Japan. B) the aerospace industry. C) the dot-com Internet industry. D) the chemicals industry.
87)
What was created as a solution to the temporary nature of the matrix structure? A) line organizations B) cross-functional self-managed teams C) line-and-staff organizations D) networked organizations
88) What describes a group of employees from different departments working together on a long-term basis? A) focus group B) mixed function groups C) cross-functional self-managed teams D) intrapreneurial teams
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89)
Cross-functional self-managed teams work best when A) leadership is shared. B) there are at least two line-and-staff managers on the team. C) the teams consist of members of only two functional units. D) the academic levels of all members are comparable.
90)
What is an advantage of a line organization in a large business? A) It does not require specialists to advise people along the line. B) Responsibility and authority are clearly defined. C) Each worker has several supervisors. D) It is very flexible.
91)
Which position would be classified as a staff position? A) an assembly-line worker for a major auto manufacturer B) the chief executive officer of a small corporation C) a sales manager for a chain of clothing stores D) an attorney in the legal department of a manufacturing corporation
92)
What is an advantage of a matrix organization structure? A) It is much cheaper to staff than other organization models. B) It provides for efficient use of organizational resources. C) The project teams are permanent. D) It is a complex organization structure.
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93)
What is true of cross-functional teams?
A) Cross-functional teams are prohibited from sharing information across national boundaries. B) Employees on the teams are frustrated by organizational rules and regulations. C) Cross-functional teams work best when the voice of the customer is brought into the organization. D) Cross-functional teams are disbanded once the current project is complete.
94) What is the main difference between a matrix-style organization model and a crossfunctional team? A) The matrix model has a limit on the number of functional units who send an expert to join the team, whereas the cross-functional team does not. B) The matrix model is a temporary arrangement, whereas the cross-functional team is a more long-term arrangement. C) The matrix model shares leadership responsibilities within the group, whereas the cross-functional team does not. D) The matrix model is a more long-term arrangement, whereas the cross-functional team is a temporary arrangement.
95) As related in the "Adapting to Change" box "Unholy Holocracy!", the CEO of Zappos recently experimented with what type of organizational change? A) increased centralization and reduction of management levels B) decrease in staff personnel and increase in line workers C) increased self-management and decentralization D) broadening the span of control
96) What competitive advantage began to falter as Zappos moved to a strictly decentralized business model, as noted in the "Adapting to Change" box "Unholy Holocracy!"?
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A) market flexibility B) product differentiation C) low operating costs D) extraordinary customer service
97) The organizational structure of the Department of Agriculture provides for direct twoway lines of responsibility, authority, and communication running from the top to the bottom. Additionally, each person in the division reports to only one superior. The Department of Agriculture is clearly an example of a(n) A) matrix organization. B) functional organization. C) line organization. D) service organization.
98) Harriet, part of the human resources department at a multinational corporation, works with several hundred employees. Her main function is to advise and assist managers in other departments, such as marketing and production, when they make staffing decisions. Harriet's position would be classified as a(n) __________ position. A) staff B) line C) first-line D) production
99) Adrian is a production engineer at Wired Manufacturing. He recently joined a team of specialists from other departments in the business, such as marketing and finance. This long-term team assignment has developed several new products. Adrian enjoys working in this environment, partly because Wired's management has given the team the freedom and flexibility to make decisions. Recently, outsiders from the firm's major distributors and suppliers have been included on the team. It appears that Adrian's team is a(n)
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A) interfunctional matrix organization. B) multidivisional group think-tank. C) temporary development team. D) cross-functional self-managed team.
100) Julio is the owner of Happy Times, a party supply company. The company provides tents, tables, chairs, and related products for weddings, bar and bat mitzvahs, graduations, birthdays, and other celebrations. As sales have increased, the organization has brought on more personnel and departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Happy Times' organization chart, you agree it uses a
A) line organization model. B) line-and-staff organization model. C) matrix organization model. D) cross-functional team organization model.
101) Rachelle developed two VR games. However, she didn't do it alone. She hired two programmers, a marketing specialist, and created a small company. Rachelle considers herself a pioneer and wants to position her company the same way. She solicits your advice as she moves forward in structuring it, and you suggest hiring few potential customers to join her team of employees as beta testers. You also suggest that maybe she should solicit globally. You are suggesting to Rachelle to put together a
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A) line organization model. B) line-and-staff organization model. C) matrix organization model. D) cross-functional team.
102) Booker is a project manager at Ryland Industries and is able to borrow specialists from the organization on a regular basis to assist in major projects. After the project ends, the specialists return to their functional units to await new assignments. Ryland Industries utilizes a A) line organization model. B) bi-functional organization model. C) lateral transfer organization model. D) matrix organization model.
103) __________ is using communications technology and other means to link organizations and allow them to work together on common objectives. A) Networking B) Structural linking C) Functional sharing D) Strategic planning
104) Which term describes an environment in which data is instantly available via the Internet to organizational partners? A) simulated B) real time C) virtual business D) e-commerce
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105) Which term describes a company being so open to other companies working with it that electronic information is shared as if the companies were one? A) virtual B) webworking C) transparency D) interconnected
106) What term describes a temporary networked organization made up of replaceable firms that join and leave as needed? A) online corporation B) benchmarked system C) outsource system D) virtual corporation
107) The process of rating an organization's practices, processes, and products against the best of the world is known as A) webworking. B) outsourcing. C) benchmarking. D) subcontracting.
108) What term describes the activity of a firm that assigns specific functions, such as accounting or legal work, to other organizations rather than performing these functions themselves?
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A) functional sharing B) outsourcing C) benchmarking D) virtual distribution
109) __________ refer to those functions that an organization does as well as, or better than, any other organization in the world. A) Primary functions B) Comparative strengths C) Residual functions D) Core competencies
110) __________ is the term used to describe those functions that a firm can do as well or better than others. It performs these functions in-house, rather than outsourcing. A) Benchmarks B) Standard responsibilities C) Operational requirements D) Core competencies
111) In today's competitive environment, cost containment is extremely important to survival. What tends to increase efficiency in the production and distribution of goods? A) tablets B) real-time data C) matrix restructuring D) self-managed teams
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112)
Which statement best describes the evolution of organization design?
A) Companies have evolved to cross-functional teams because line models and lineand-staff models have become too costly to maintain. B) Most companies are finding that the stages of product development are much slower than in the past because new products are much more complicated than products of several years ago. Matrix models work much better in the current environment. C) The development of new technology allows for companies to be much more selfcontained and able to maintain their competitive advantage due to increased privacy standards. D) Most companies are now part of a vast network of global businesses, and part of a larger system.
113) Companies benefit today from interfirm cooperation. One way they cooperate is through networking. Another way is by seeking technological knowledge and new processes from exemplary firms sometimes outside their own industries. This is called A) competency capturing. B) technology swapping. C) benchmarking. D) insourcing.
114) The management of Odyssey Electronics sees itself as a topnotch producer of components used in gaming systems. The outstanding performance of the production department indicates that this activity is one of the firm's A) fiscal responsibilities. B) core competencies. C) benchmark assets. D) target competitive advantages.
115) Galaxy Enterprises, a corporation of amusement parks, uses an accounting firm to handle the payroll and tax functions for the company. Using the services of another firm in this manner is an example of
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A) outsourcing. B) functional reassignment. C) core competencies. D) benchmarking.
116) Bargain Buys, a regional discount retailer, carefully watches and compares its operations with the operations of its closest rivals. This is an example of A) outsourcing. B) functional positioning. C) core competency ranking. D) competitive benchmarking.
117) Pretty Face, a cosmetology trade publication, utilizes the resources of other organizations as needed and business relationships are temporary as well as flexible. Pretty Face is a networked organization made up of replaceable firms that join the network and leave it as needed. This unique organization is an example of A) competitive benchmarking. B) a virtual corporation. C) core competency ranking. D) real-time transparency.
118) Dynasty Home manufactures a variety of home appliances and has historically produced the components for their products in-house. However, the company now contracts with other firms to produce these components. This strategy of __________ is a current trend among U.S. manufacturers.
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A) outsourcing B) core positioning C) foreign competency D) competitive benchmarking
119) Anna is a sales representative for the Midwest Medical Supply. She really enjoys working for Midwest Medical, because she and others are treated as highly valued employees. Sales reps are given freedom and flexibility in their relationships with customers. While there are only a few layers of management at Midwest Medical, Anna has found that these managers try their best to support and assist her efforts. Based on Anna's experience, it appears that Midwest Medical is a(n) A) bureaucratic organization. B) inverted organization. C) tall organization. D) casual organization.
120) Younger people today are often called __________ because they have never known life without the Internet and cell phones. A) high-tech heroes B) social networkers C) digital natives D) electronic eggheads
121)
What is a common response of employees when faced with change? A) "That's the way we've always done things." B) "Perhaps I'll be able to get a promotion now." C) "I'm excited to learn something new." D) "This should be easy to accept."
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122) Which term describes the redesigning of an organization so that it can more effectively and efficiently serve its customers? A) reinventing B) restructuring C) reauthorizing D) reversion
123) An organization that has contact people at the top and the chief executive officer at the bottom is known as a(n) A) bureaucracy. B) hierarchy. C) improvised organization. D) inverted organization.
124) Empowering employees to better serve customers requires __________ front-line employees. A) fewer B) less training for C) more support for D) uniforms for
125) The widely shared values within an organization that provide unity and cooperation to achieve common goals are together known as the
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A) normative matrix. B) predefined group values. C) ethical system. D) organizational culture.
126) The __________ of a business firm is the system that details lines of authority, responsibility, and position, similar to the structure on organization charts. A) outsourcing structure B) formal organization C) informal organization D) normative design
127)
All organizations have two organizational systems, which are A) the command system and the control system. B) the formal organization and the informal organization. C) the functioning system and backup system. D) the primary organization and secondary organization.
128) The __________ is the system of relationships that develop spontaneously as employees meet and form power centers. A) informal organization B) bureaucratic structure C) secondary organization D) formal organization
129)
In open organizations the informal organization can be
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A) a hindrance to effective management. B) an asset that promotes harmony among workers. C) a roadblock to the corporate culture. D) part of the formal organization.
130)
The __________ is the nerve center of the informal organization. A) organizational database B) intranet C) grapevine D) company newsletter
131)
One of the most difficult management challenges today is managing change. Why is this?
A) Change requires cooperation and an awareness of a need for change. B) Change requires a lot of bailout money from the government. C) Change requires decentralization of decision making. D) Change will invariably result in an inverted organization and management does not want to relinquish its position power in order to make that happen.
132)
In an inverted organization, the job of management is to A) closely monitor employee performance. B) establish rules and regulations to guide worker behavior. C) make all of the basic decisions. D) assist and support front-line people.
133)
For an inverted organization to be effective, it requires
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A) managers with strong position power. B) managers who are both technologically savvy and conceptually savvy. C) better-educated, better-trained, and better-paid employees D) a focus on what is best for production.
134)
The informal organization of a business is probably best suited to A) give workers a clear idea of where they stand in the organization. B) provide helpful guidelines about how to handle routine problems. C) provide a mechanism that generates careful reasoned decisions about critical issues. D) create a feeling of camaraderie among employees and encourage teamwork.
135)
A firm's formal organization would be better suited than its informal organization to
A) create an atmosphere of friendship and camaraderie among workers. B) find answers to critical problems that require logical analysis. C) find creative solutions to short-term problems. D) find a way around bureaucratic rules and regulations in order to get things done quickly.
136) In the "Adapting to Change" box, what strategy is suggested to help virtual workers better cope with the stress generated by 24/7 connectivity? A) establish time requirements for responding to phone or e-mail messages B) commit to schedules establishing universal work hours C) respond to work issues or inquiries only during the work week D) invert the organization to increase employee empowerment
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137) Kenneth recently earned his Ph.D. in biochemistry and has been asked to join a lab at a prestigious university. After a month on the job, he remarked to a graduate student at his former university that the spirit of help and cooperation at the lab was remarkable. He enjoyed going to work each day and sometimes exchanged calls with other lab partners in the evening with ideas to improve each other's experiments. Kenneth mentioned, "Now I understand why this lab is considered one of the best in the nation!" Kenneth is referring to A) the formal organization. B) the inverted organization. C) the balanced organization. D) the organizational culture.
138) Realizing that it was time to invest in an updated information system, the CEO made an announcement in his weekly email to his team: "We are going to shake things up around here. We need to break apart our information system, and start over." Unfortunately, the message translated poorly in the minds of employees. A total shake-up such as this could impact employee morale. The CEO needs to communicate that progressive companies today incorporate strategies that A) prevent one person from driving change to the detriment of others. B) reflect a stay-the-course environment. C) embrace a change-oriented culture. D) minimize the need for future change.
139) Tomas had worked for his company for several years and was considered a politically savvy employee. After earning several promotions, he became the new president of the company. Lorna, a longtime colleague, had reported to him back when he was a first-line supervisor. She understood how the human side of the organization worked and made certain that she maintained a direct line of communication with Tomas. On the company's organization chart, Nina maintained a lower-level position; but, due to her open line of communication with Tomas, she was able to successfully push her agenda. The human side of the organization is synonymous with the
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A) inverted organization. B) formal organization. C) informal organization. D) benchmark.
140) Syd experienced frustration with her new job at Hamilton Security Systems—that is, until she befriended an assistant, McKenzie, who works in another department. Over lunch in the break room, McKenzie shared with Syd the way things really work at Hamilton. Syd quickly learned that A) what she learned in her business classes didn't really help her in the real world. B) an unofficial informal organization exists that she can utilize to help her do her job. C) organizational culture can be negative. D) not all businesses have a formal organization.
141) If you are a new employee at Vernon Industries, Hank is the man to see in the welding department. Though he may not be a manager, he is the person that most of the others in the department look to for advice and assistance. Hank is an important member of the firm's A) supervisory management. B) participatory control. C) informal organization. D) closet cabinet.
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142) Angelica Canizales is the CEO of Mucho Dinero Enterprises. Sales have dropped for four consecutive years and accountants have reported net losses in each of the last two years. Employees appear discouraged and frustrated. Recently, Angelica met with managers from marketing, production, and finance to listen to their views regarding the company's problems. The managers unanimously agreed that the main problem was a lack of communication among the several functional areas of the business. Each manager felt that the firm could increase quality and customer satisfaction with better interdepartmental communication. Angelica also met with marketing and production employees to get their respective opinions on the problems of the firm. One employee from the production department observed, "We have so many layers of management that it takes forever to make decisions." An employee from marketing complained, "This place is so bogged down with rules and regulations that there is no opportunity to be creative." Several employees shared their opinions regarding their bosses. Specifically, one employee said, "My boss never pays attention to my ideas. He just issues orders and expects me to obey them." Angelica decided, after listening to many comments from managers and employees and also suppliers and customers, that the only way to end Mucho Dinero's slide was to completely rethink the firm's structure and to make radical changes in its organization. She presented her ideas to the board of directors, promising to voluntarily resign if her efforts to reorganize did not return the firm to profitability.
142.1) Employee complaints that there are too many layers of management and too many rules and regulations suggest that Mucho Dinero is a(n) A) flat organization. B) bureaucratic organization. C) inverted organization. D) wide organization.
142.2) Angelica's decision to completely redesign Mucho Dinero's organization indicates that she believes the best approach to her firm's problems is A) competitive benchmarking. B) flexible departmentalization. C) restructuring. D) organizational therapy.
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142.3) Currently, Mucho Dinero is organized into specialized departments such as marketing, finance, production, and personnel. These departments are designed to allow people with similar skills and expertise to work together. This approach is known as __________ departmentalization. A) functional B) process C) interest group D) task-oriented
142.4) In order to encourage more interdepartmental communication and cooperation, Angelica is thinking about setting up groups of workers from different departments to work together on a long-term basis. She is even thinking about asking people from some of Mucho Dinero's suppliers, customers, and distributors to join these groups. The type of group that Angelica is considering is known as a(n) A) focus group. B) dynamic group. C) matrix team. D) cross-functional team.
142.5) From her discussions with employees, Angelica learned quickly that production workers put their trust in 20-year veteran Willie McClaren. Many people told her that if you wanted something done, Willie was the person to see. Willie appears to be an important part of the A) decentralized authority. B) span of control. C) informal organization. D) functional structure.
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143) Organizing the structure of the company means deciding what jobs need to be done and who is responsible for doing them. ⊚ true ⊚ false
144)
In a capitalist economy, organizations seldom reorganize due to changing markets. ⊚ true ⊚ false
145) One key to organizational success is to go back to basic principles and build the business on a sound foundation. ⊚ true ⊚ false
146) Small business organizations lack the size required to reap the benefits of labor specialization. ⊚ true ⊚ false
147) The purpose of a division of labor and specialization is to improve an employee's job performance. ⊚ true ⊚ false
148) Managing a growing business often requires managers to create departments to accomplish various tasks. ⊚ true ⊚ false
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149) The process of creating individual departments to do specialized tasks is called departmentalization. ⊚ true ⊚ false
150) Division of labor refers to deciding how many jobs must be accomplished and then dividing them up amongst the labor force. ⊚ true ⊚ false
151)
The success of the firm often depends on assigning the right tasks to the right person. ⊚ true ⊚ false
152) The process of setting up individual departments to do specialized tasks is called job specialization. ⊚ true ⊚ false
153) Correctly structuring a business organization allows managers to avoid delegating responsibility and authority to employees. ⊚ true ⊚ false
154)
Division of labor is difficult to achieve in small businesses. ⊚ true ⊚ false
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155) Departments are functional units within the business such as sales, accounting, finance, and marketing. ⊚ true ⊚ false
156) As indicated in the "Making Ethical Decisions" box "Would You Sacrifice Safety for Profits?", organizational decisions that affect profits in a negative way should be avoided at all cost. ⊚ true ⊚ false
157) Bravo Books and More needs to reorganize its floor space. Management decided to reduce seating space in its stores in order to create room for new shelves to display a popular new line of educational toys. This company's effort is an example of how a firm may reduce its emphasis in one product line in order to serve customer preferences and trends. ⊚ true ⊚ false
158) To better organize his landscaping business, Donte started to divide each job into several parts. One is excavation and removal of old landscaping, the next is design, followed by purchasing, and finally installation of new plants. If he assigns a different employee to each part, this action would be an example of departmentalization. ⊚ true ⊚ false
159) Jessie has long dreamed of opening her own restaurant. She, of course, knows that she will need to organize her business. Organizing begins with determining the work to be done. ⊚ true ⊚ false
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160) When Eric Schmidt joined Google, he tackled the organization function head-on. In speaking at a large conference with its founders, Sergey Brin and Larry Page, he commented that Google was running pretty well but "it just needed a little structure." Schmidt was referring to basic organization principles such as division of labor, specialization, and getting the departments running smoothly. ⊚ true ⊚ false
161) The driving force behind the change in many business organizations is the change in consumer expectations. ⊚ true ⊚ false
162)
Henri Fayol and Max Weber are best known for their contributions to accounting theory. ⊚ true ⊚ false
163) Fayol's principle of the division of labor says that functions should be divided into areas of specialization such as production, marketing, and finance. ⊚ true ⊚ false
164) One of Fayol's principles suggests that managers should have the right to give orders and expect others to follow. ⊚ true ⊚ false
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165) Fayol's principle of esprit de corps says that employees should be divided into small groups that can be directed efficiently by a single manager. ⊚ true ⊚ false
166) Fayol's principles suggest that the goals of the firm are less important than the goals of individual workers. ⊚ true ⊚ false
167) According to Fayol's principle of authority, if you have authority you also have responsibility. ⊚ true ⊚ false
168) Fayol believed that the amount of decision-making power vested in top management should be the same in all situations. ⊚ true ⊚ false
169)
Fayol believed that managers should treat employees and peers with respect and justice. ⊚ true ⊚ false
170) Clear communication among workers and keeping order in materials and people are included in Fayol's principles. ⊚ true ⊚ false
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171)
Max Weber's principles of organization were similar to those of Henri Fayol. ⊚ true ⊚ false
172) Weber believed that large organizations required everyone to follow the established rules and guidelines precisely. ⊚ true ⊚ false
173) Weber was critical of bureaucrats because he felt they undermined the efficiency of the organization. ⊚ true ⊚ false
174) Weber had a great deal of faith in managers. He was confident that a firm would do well if employees simply did as they were told. ⊚ true ⊚ false
175) Weber promoted the idea of the pyramid-shaped organization structure for large businesses. ⊚ true ⊚ false
176)
Max Weber's organizational theories require an educated workforce to operate efficiently. ⊚ true ⊚ false
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177)
Weber was a strong proponent of bureaucracy. ⊚ true ⊚ false
178)
Some business organizations still follow the 1940s organizational theory of Max Weber. ⊚ true ⊚ false
179)
Weber believed that employees should be empowered to make their own decisions. ⊚ true ⊚ false
180)
Job descriptions are an important part of Max Weber's organizational theory. ⊚ true ⊚ false
181)
Max Weber believed that promotion should be based solely on seniority. ⊚ true ⊚ false
182)
The design of a bureaucratic organization assumes a well-educated workforce. ⊚ true ⊚ false
183)
An organizational hierarchy establishes one person at the top of an organization.
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⊚ ⊚
true false
184) A chain of command is a line of authority that moves from the lowest level of the hierarchy to the top. ⊚ true ⊚ false
185)
A hierarchy requires many top managers, but only a few middle managers. ⊚ true ⊚ false
186) According to Weber, a bureaucrat is a middle manager whose job is to implement top management's orders. ⊚ true ⊚ false
187)
A bureaucracy empowers employees to quickly respond to customers' wants and desires. ⊚ true ⊚ false
188) A bureaucracy is an organization with many layers of managers who set rules and regulations and oversee all decisions. ⊚ true ⊚ false
189) Bureaucratic organizations establish rules and regulations that everyone is expected to follow.
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⊚ ⊚
true false
190)
Bureaucratic organizations are not very responsive to customers. ⊚ true ⊚ false
191)
A bureaucracy is designed to be customer focused. ⊚ true ⊚ false
192)
Bureaucratic organizations are structured to empower employees and please customers. ⊚ true ⊚ false
193)
A bureaucratic style of organization is slow when responding to change. ⊚ true ⊚ false
194) Empowerment works only when employees are given the proper training and resources to respond. ⊚ true ⊚ false
195) The basic idea behind the organization design of Fayol and Weber was that management wanted to control workers.
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⊚ ⊚
true false
196) An organization chart shows who is accountable for the completion of specific work and who reports to whom. ⊚ true ⊚ false
197) Looking at a traditional organization chart, you will view who reports to whom; you will have a sense of each person's authority and responsibility, and the type of work that they perform for the organization. ⊚ true ⊚ false
198) As organizations grew, the use of Fayol's principles led to rigid organizations that didn't always respond quickly to consumer requests. ⊚ true ⊚ false
199) In today's fast-paced business environment, Weber's bureaucratic ideas work well. These principles permit business to respond quickly to customer changes. ⊚ true ⊚ false
200) When a firm experiences economies of scale, this means that as production levels rise (it makes more of something), the cost of supplies and the cost of labor that go into the production go down. ⊚ true ⊚ false
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201) The purpose of Weber's and Fayol's principles was for the benefit of management, as opposed to pleasing customers. ⊚ true ⊚ false
202) Weber put great trust in the creativity, skills, and pride of employees and believed that managers should act more as coaches than as bosses. ⊚ true ⊚ false
203) Most businesses adopt a bureaucratic organization in order to speed up their decisionmaking process. ⊚ true ⊚ false
204) Cody is a manager at a manufacturing company that creates commercial lighting fixtures. He thinks it is very important and less confusing if each worker has only one boss. Cody's view is consistent with Fayol's unity of command principle. ⊚ true ⊚ false
205) Tanner, a middle manager at a nonprofit, spends much of his time developing ways to implement the ideas from top management. Max Weber would have considered Tanner a bureaucrat. ⊚ true ⊚ false
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206) Breanna thinks all workers should receive the same pay regardless of their position within a company. Breanna's views on wages illustrate Fayol's principle of equity. ⊚ true ⊚ false
207) Paola is a middle manager at a large, multinational corporation. She prefers to involve her subordinates in decision making and gives her workers a reasonable amount of flexibility in how they do their jobs. Paola's management approach illustrates the principles first popularized by Max Weber. ⊚ true ⊚ false
208) Norman works in the marketing department of a large firm. This is an example of Fayol's division of labor concept. ⊚ true ⊚ false
209) As a new employee in a bureaucratic organization, Sheila can expect a great deal of independence and authority. ⊚ true ⊚ false
210) Economy Packaging Company's chain of command moves from the top of the hierarchy down to lower-level managers. The company is organized by department with specific rules and regulations that everyone is expected to follow. These characteristics suggest that Economy Packaging is an example of a bureaucratic organization. ⊚ true ⊚ false
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211) A manager needs to be called to sign off on every return that a cashier performs at Fashion Now Clothing. The CEO continues this policy because he wants every manager to "look those customers right in the eye" and "stake their job on taking those items back." Clearly, Fashion Now empowers its employees to make decisions at their jobs. ⊚ true ⊚ false
212) Jonny was a team supervisor in a very large organization when the refrigerator in its lunchroom stopped functioning. He started the paperwork on the day it died, then the refrigerator request went out for bid. After that, two middle managers needed to approve acceptance of the bid and document their decision, and the purchasing director had final approval. The refrigerator arrived six months later. Max Weber would have approved of the decision process and its documentation at Jonny's company to back up such a refrigerator purchase. ⊚ true ⊚ false
213) The degree to which an organization allows lower-level managers to make decisions reflects the degree of decentralization. ⊚ true ⊚ false
214) An advantage of decentralized authority is that those individuals closest to the customers and more familiar with local conditions make decisions. ⊚ true ⊚ false
215) Centralized authority provides for the delegation of authority to employees who are then better able to respond to customers' needs. ⊚ true ⊚ false
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216) As a result of rapidly changing markets and global differences in consumer tastes, more firms are considering centralized authority. ⊚ true ⊚ false
217) A weakened corporate image is one of the disadvantages of a decentralized business organization. ⊚ true ⊚ false
218) In firms with centralized authority, each business unit is treated as if it is a completely separate and independent organization. ⊚ true ⊚ false
219)
Span of control refers to the number of different markets a business can serve efficiently. ⊚ true ⊚ false
220) The optimum number of subordinates a manager should supervise is referred to as the span of control. ⊚ true ⊚ false
221)
In today's business environment, the trend is to decrease the span of control. ⊚ true ⊚ false
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222)
The more standardized the work, the wider the span of control. ⊚ true ⊚ false
223)
Managers near the top of an organization have the broadest span of control. ⊚ true ⊚ false
224)
The more complex the job, the narrower the span of control. ⊚ true ⊚ false
225)
When employees are self-managed, a company can implement a wider span of control. ⊚ true ⊚ false
226) Improvements in information technology have permitted companies to increase their span of control. ⊚ true ⊚ false
227)
A tall organization structure consists of multiple levels of management. ⊚ true ⊚ false
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228) A flat organizational structure is designed to be more responsive to the needs of management. ⊚ true ⊚ false
229)
Flat organizations have fewer managers. ⊚ true ⊚ false
230) An advantage of a tall organization is that it ensures fast and efficient communications throughout the organization. ⊚ true ⊚ false
231) A recent business trend is the elimination of layers of management, creating flatter organizations and subsequently, a wider span of control. ⊚ true ⊚ false
232)
Departmentalization is the dividing of organizational functions into separate units. ⊚ true ⊚ false
233)
The traditional way to departmentalize an organization is by geographical area served. ⊚ true ⊚ false
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234) Departmentalization by function allows employees opportunity to further develop their skills. ⊚ true ⊚ false
235)
Departmentalization by function typically increases the cost of doing business. ⊚ true ⊚ false
236) Departmentalization by function groups employees based on similar skills, expertise, or resource use. ⊚ true ⊚ false
237)
An advantage of departmentalization is groupthink. ⊚ true ⊚ false
238) Organizations that utilize functional departmentalization benefit from improved communication between departments. ⊚ true ⊚ false
239) Departmentalization creates an environment in which people are trained in a variety of managerial responsibilities. ⊚ true ⊚ false
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240)
Economies of scale can be achieved through departmentalization. ⊚ true ⊚ false
241)
Some firms use a combination of departmentalization techniques. ⊚ true ⊚ false
242) The decision on how to departmentalize should depend on the customer and the product or service the firm is offering. ⊚ true ⊚ false
243)
Departmentalizing by customer group has proven ineffective. ⊚ true ⊚ false
244) If there are several steps in getting the product to its final state, the company may choose to departmentalize by process. ⊚ true ⊚ false
245) Some companies have created hybrid versions of departmentalization, where they combine two or more traditional ways of departmentalizing. ⊚ true ⊚ false
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246) When management structures the organization, it clarifies who gets to make decisions, how many people report to one manager, and how many different departments the company needs in order to operate effectively. ⊚ true ⊚ false
247) When management structures the organization, it makes decisions about which products and services it will offer and how it is going to finance the company. ⊚ true ⊚ false
248) Because top managers supervise the firm's most talented workers, they generally have a broader span of control than middle or first-line managers. ⊚ true ⊚ false
249) As the span of control widens, there is usually a reduction of middle management and an emphasis on empowerment. ⊚ true ⊚ false
250)
A flat organization is less likely to respond quickly to customer needs. ⊚ true ⊚ false
251) To avoid losing that small-company-feel, fast growing companies try to maintain a flat organization structure. ⊚ true ⊚ false
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252) Although a firm may experience better cost controls through departmentalization, it may not increase its responsiveness to customer needs. ⊚ true ⊚ false
253)
Businesses seldom create separate departments to serve customers with different needs. ⊚ true ⊚ false
254) Mabel's Homestyle Cafes is a nationwide chain with locations throughout the United States. Top management at Mabel's believes that customers in different regions have different tastes and that its cafes may face more intense competition in some regions than in others. Therefore, Mabel's top management gives local managers the freedom to offer local flavors in addition to its traditional entrees, and the ability to decide on a reasonable pricing strategy for its meals. Mabel's typifies a decentralized organization. ⊚ true ⊚ false
255) Management at Clean Bowl, a nationwide vegetarian restaurant chain, believes that its customers value a predictable and consistent level of service and quality. When customers stop at one of its restaurants anywhere in the United States, they should know what to expect in terms of menu, price and quality. In order to maintain this consistency, Clean Bowl should adopt a decentralized organization. ⊚ true ⊚ false
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256) After a report identified low employee morale, managers for Happy Mornings Hotels Inc. were concerned. Employee responses showed frustration with their inability to deal directly with customers' concerns and complaints. Employees feel that if they were empowered with the authority to make decisions, customer satisfaction would dramatically increase. This illustrates one of the disadvantages of decentralized authority. ⊚ true ⊚ false
257) In the central manufacturing plant of the Golden Granite Company, a foreman closely supervises her workers. She reports to the shift supervisor who reports to the head of the production department, who then reports to the assistant plant manager, who reports to the plant manager. The plant manager, in turn, reports to a district manager, who then reports to a product group manager, who reports to an assistant vice president of operations, who keeps in close touch with an executive vice president. The layers of management indicate that Golden Granite Company is a tall organization. ⊚ true ⊚ false
258) Malika is an experienced manager with excellent communications skills. The workers in her team are highly skilled and capable of doing their work with very little direct supervision. Malika's span of control is likely to be quite broad. ⊚ true ⊚ false
259) Modern Nest Manufacturing is organized into departments such as finance, production, marketing, data processing, and accounting. Modern Nest has chosen to departmentalize by function. ⊚ true ⊚ false
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260) Top management at National Energy Solutions looks to encourage communication between different departments to stop employees from becoming narrow specialists. The best way to reach these goals is to departmentalize National Energy Solution's organization by function. ⊚ true ⊚ false
261) EcoGreen, a business specializing in outdoor sprinkler systems, serves several commercial customers as well as residential customers. As the business expands, EcoGreen's management may want to consider departmentalizing by customer group and then by process. ⊚ true ⊚ false
262) Years ago, Micah created a successful sportswear company that produces uniforms for clients in the Midwest. As his business started to grow, Micah added functional departments, including a marketing department and an accounting department. But now, he sees that employees who specialized in these areas no longer share knowledge with each other in the same way they did when the business was smaller. As one of Micah's consultants, you explain that as the company grows taller, it cannot avoid this pitfall, and he should focus on continued functional departmentalization, especially if he supports innovation and rapidly responding to a changing customer climate. ⊚ true ⊚ false
263) Autumn works in the finance department at the headquarters of a large home improvement retailer. Her main responsibility is to keep an eye on department expenditures and figure out how to cut costs whenever possible. Spenser, the marketing director for the same company, shares information with Autumn only when he absolutely has to. He finds her inflexible, and not understanding of what it takes to roll out a new product line. Autumn and Spenser typify a disadvantage of departmentalization. ⊚ true ⊚ false
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264) Traditional organizational models such as a line model or a line-and-staff model provide the flexibility demanded in a changing business environment. ⊚ true ⊚ false
265) In a line organization, there are many specialists who serve as advisors and assistants to the managers who make decisions. ⊚ true ⊚ false
266)
Small businesses often use a line organization model. ⊚ true ⊚ false
267)
Line organizations follow Fayol's traditional management rules. ⊚ true ⊚ false
268) Line managers issue orders, enforce discipline, and adjust the organization as conditions change. ⊚ true ⊚ false
269) In large businesses, a line organization provides firms the ability to respond quickly to a changing environment. ⊚ true ⊚ false
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270)
Line organizations clearly define the lines of authority and responsibility. ⊚ true ⊚ false
271) Line organizations often experience the problem of employees reporting to more than one boss. ⊚ true ⊚ false
272) A line organization in a large business often suffers from excessively slow lines of communication. ⊚ true ⊚ false
273) In a line-and-staff organization, staff personnel perform functions such as production and sales that contribute directly to the primary goals of the organization. ⊚ true ⊚ false
274) In a line-and-staff organization, staff positions are temporary jobs used to train new line managers. ⊚ true ⊚ false
275) While staff personnel have the authority to make policy decisions, line personnel have the authority to advise and make suggestions in a line-and-staff organization.
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⊚ ⊚
true false
276) An advantage of a line-and-staff organization is that it provides people that advise and assist line managers as they perform their jobs. ⊚ true ⊚ false
277) The matrix organization model brings together experts from different functional units of the firm to work on specific projects. ⊚ true ⊚ false
278) The team experts in a matrix organization remain part of the traditional line-and-staff structure. ⊚ true ⊚ false
279) A matrix organization produces an environment that discourages cooperation and teamwork. ⊚ true ⊚ false
280)
A disadvantage of the matrix organization is the temporary nature of the teams. ⊚ true ⊚ false
281)
Matrix organizations give managers flexibility in assigning people to projects.
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⊚ ⊚
282)
true false
Matrix organization structures provide for more efficient use of organizational resources. ⊚ true ⊚ false
283) A recent trend in organization models is the development of cross-functional, selfmanaged teams of employees who work together on a long-term basis. ⊚ true ⊚ false
284) Cross-functional self-managed teams are groups of employees empowered to work with suppliers and customers to develop new products and give great service. ⊚ true ⊚ false
285) Cross-functional teams serve as advisory committees offering their expertise to line decision makers. ⊚ true ⊚ false
286)
Cross-functional teams defy the trend toward customer-driven organizations. ⊚ true ⊚ false
287) Cross-functional teams consist of employees from different departments who work together on a long-term basis.
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⊚ ⊚
true false
288) Cross-functional teams avoid involving groups outside of the firm to ensure their plans are not leaked to their competitors. ⊚ true ⊚ false
289) Cross-functional teams work best when the voice of the customer is brought into organizations. ⊚ true ⊚ false
290)
Cross-functional teams work well when leadership of the team is shared. ⊚ true ⊚ false
291) Including customers and suppliers on cross-functional teams violates the interests of stockholders. ⊚ true ⊚ false
292) By structuring a company with cross-functional teams, there is a greater chance that a business is more responsive to social trends affecting customer preferences. ⊚ true ⊚ false
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293) A matrix team for an aerospace company may consist of a project manager, a finance expert, a marketing specialist, a member of production, and two design engineers. ⊚ true ⊚ false
294) It is strategically not sensible for a firm to consider asking suppliers and customers to join a cross-functional self-managed team that is testing iterations of future products. ⊚ true ⊚ false
295) One disadvantage of the matrix-style of organization is that it is more difficult to keep development projects on schedule. The model slows down the time from design to production, and then to market. ⊚ true ⊚ false
296) Due to the competitive nature among companies competing for the same customers, cross-functional teams never consist of individuals from more than one firm. ⊚ true ⊚ false
297) Cross-functional teams that go beyond company boundaries share production information but seldom market information. ⊚ true ⊚ false
298) As described in the "Adapting to Change" box, CEO Tony Hsieh returned to a traditional management system at Zappos after experimenting unsuccessfully with self-management. ⊚ true ⊚ false
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299) Precision Enterprises is a medium-sized organization with well-defined lines of authority where every employee reports to only one boss. However, the managers at Precision Enterprises complain about not having expert support staff to offer advice. Because of the inefficient long lines of communication, opportunities are slipping through the cracks. These characteristics suggest that Precision employs a matrix organization. ⊚ true ⊚ false
300) Donna is an attorney working for Nelson Engineering. She provides legal advice and assistance to Nelson Engineering's managers. Donna's job would be classified as a staff position. ⊚ true ⊚ false
301) Perez Manufacturing builds small consumer kitchen products like mixers and toaster ovens. The industry is relatively stable, having few new advances in product development. Perez should use a line or line-and-staff organizational structure to ensure efficient operations. ⊚ true ⊚ false
302) Clifton was temporarily assigned to work with a team of specialists from various departments to develop a new product, though his usual home is in the engineering department. After the project is completed, Clifton will return to his regular position in the engineering department. This arrangement illustrates the use of a cross-functional team. ⊚ true ⊚ false
303) Cardinal Financial Services is deliberating the use of cross-functional teams. In order to be most effective, Cardinal Financial Services should include customers as members of the teams.
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⊚ ⊚
true false
304) Landon developed two VR games. However, he didn't do it all on his own. He hired two programmers and a marketing specialist, and created a small company. He considers himself a pioneer and wants to position his company the same way. He solicits your advice as to how he should structure his organization as he moves forward, and you suggest that he hire a few potential customers to join his team of employees as beta testers. And, you suggest, maybe he should solicit globally. The structure you have described would simulate a line-and-staff organization. ⊚ true ⊚ false
305) Julio is the owner of Celebrations Inc., a small party supply company. The company provides tents, tables, chairs, and related paraphernalia for weddings, bar and bat mitzvahs, graduations, birthdays, and other special events. As sales have grown, the organization has hired more employees and has departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Celebrations' organization chart as shown below, you agree it uses a line organization model. ⊚ true ⊚ false
306) Networking uses communication technology to link organizations, allowing them to work together on common objectives. ⊚ true ⊚ false
307)
The Internet makes real-time availability of data possible. ⊚ true ⊚ false
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308)
Transparency describes the relationship between a firm and its stockholders. ⊚ true ⊚ false
309)
Transparency allows two companies to work more efficiently together. ⊚ true ⊚ false
310)
Most companies are no longer self-sufficient or self-contained. ⊚ true ⊚ false
311)
Networking requires transparency to work most effectively. ⊚ true ⊚ false
312) A virtual corporation refers to a permanent network of firms linked by high-tech communication systems. ⊚ true ⊚ false
313) A virtual corporation is a networked organization made up of replaceable firms that join the network and leave it as needed. ⊚ true ⊚ false
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314) Benchmarking requires organizations to compare each organizational function against the best in the world. ⊚ true ⊚ false
315) Competitive benchmarking rates an organization's products and operations against the industry average. ⊚ true ⊚ false
316) Competitive benchmarking compares a company's practices, processes, and products against others in its industry, with the goal of doing it better than the competition. ⊚ true ⊚ false
317) The functions that a company can perform as well as or better than anyone else in the world are known as that firm's optimized capabilities. ⊚ true ⊚ false
318) An organization's core competencies are those functions that the firm performs as well as or better than anyone else in the world. ⊚ true ⊚ false
319) If a particular function is one of a firm's core competencies, it typically performs this function itself rather than outsourcing it to another organization.
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⊚ ⊚
true false
320) Assigning various functions that a firm might do for itself to outside organizations is known as competitive allocation. ⊚ true ⊚ false
321)
Outsourcing involves assigning various functions to outside organizations. ⊚ true ⊚ false
322) Companies have learned that working transparently through real-time networks has allowed them to better serve customers. ⊚ true ⊚ false
323) Outsourcing has become commonplace, particularly when organizations want to focus on their core competencies. ⊚ true ⊚ false
324) The virtual corporation does all its business online with partners considered a permanent part of the network. ⊚ true ⊚ false
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325) Fresh-n-Good is a wholesaler serving grocery stores nationwide. Communications technology allows Fresh-n-Good to work closely with its suppliers and customers in real time. Networking allows these organizations to operate more efficiently. ⊚ true ⊚ false
326) Regional monopoly Northern Gas wants to improve services to customers. Management recently rated the company's processes and products against the results achieved by the world's best at similar processes and products. Northern Gas has adopted a policy of international standardization. ⊚ true ⊚ false
327) Elite Athletes Swimming and Diving Club recently outsourced its marketing work. This suggests that management at Elite Athletes does not believe that marketing is one of the firm's core competencies. ⊚ true ⊚ false
328) Ryne is a self-employed patent attorney and it seems like he is always working! Large corporations hire him on an as-needed basis to review prospective ideas and help with securing patents for a variety of inventions including surgical instruments, medicines, and high-tech gadgets. Once he secures a contract, Ryne knows approximately how many weeks or months he will work. Ryne works for virtual corporations. ⊚ true ⊚ false
329) Baby Boomers, those born between 1944 and 1964, are often referenced as digital natives. ⊚ true ⊚ false
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330) Restructuring involves the redesign of an organization to be more responsive to customers. ⊚ true ⊚ false
331) To better serve customers, many firms are restructuring to empower front-line employees. ⊚ true ⊚ false
332) Technology, like the Internet, has opened up opportunities for firms to sell to new markets. ⊚ true ⊚ false
333) A company looking to use technology to win market share might look to employ digital natives because of their familiarity with the Internet and high-tech devices. ⊚ true ⊚ false
334)
Introducing change into an organization is an easy task for a manager. ⊚ true ⊚ false
335) Inverted organizations define the role of front-line employees as those workers who follow the orders of top and middle management.
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⊚ ⊚
true false
336) Inverted organizations empower employees by adding multiple layers of management and long lines of communication. ⊚ true ⊚ false
337) In an inverted organization, the purpose of management is to assist and support the decisions of employees who work directly with customers. ⊚ true ⊚ false
338) Organizations with positive images for performing exceptional service to customers are usually friendly places to work, as well. ⊚ true ⊚ false
339) Organizational culture can produce either a positive or negative impact on an organization. ⊚ true ⊚ false
340) The very best organizations have cultures that emphasize service to others, especially customers. ⊚ true ⊚ false
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341) Organizational culture refers to the widely shared values within a corporation that foster unity and cooperation. ⊚ true ⊚ false
342)
The informal organization is created by the decisions of top management. ⊚ true ⊚ false
343) While most organizations have a formal organization structure, only poorly managed firms also have an informal organization. ⊚ true ⊚ false
344) A firm's informal organization refers to the structure that identifies the authority, responsibility, and position of people within the organization. ⊚ true ⊚ false
345) The informal organization of a business can help generate creative solutions and inspire teamwork and camaraderie. ⊚ true ⊚ false
346) The formal organization of a firm provides the lines of authority to follow in routine situations. ⊚ true ⊚ false
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347) The grapevine refers to the formal channel used for confidential communications between members of top management. ⊚ true ⊚ false
348) An informal organization can be a valuable asset to managers attempting to create an environment of harmony among workers and establish the corporate culture. ⊚ true ⊚ false
349)
The informal organization appears as dashed lines on a firm's organizational chart. ⊚ true ⊚ false
350)
The informal organization is best suited for decision making on big issues. ⊚ true ⊚ false
351) The key people in a company's grapevine typically have considerable influence in the organization. ⊚ true ⊚ false
352) Successful managers will find the balance between promoting the informal organization and maintaining a formalized structure, as well. ⊚ true ⊚ false
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353) The "Adapting to Change" box reveals that our ability to be connected 24/7 can make an appropriate work-life balance more challenging. ⊚ true ⊚ false
354) Last week at Fairway Financial Services, all advisors assisting over 150 clients each received an email from the VP of Operations. The email stated that every client's investment portfolio should consist of 50% individual stock purchases, 25% bonds, and 25% property. Advisors were ordered to review all client portfolios for compliance to this directive. Clearly, Fairway is an inverted organization because management directives such as the one described are very common. ⊚ true ⊚ false
355) Savoir Learning Centers specialize in helping students with difficulties. With locations around the country, each center consists of a manager and several tutors and counselors. The counselors and tutors have a great deal of flexibility to design programs specifically for individual students. In fact, these first-line employees are considered to be the key people in the organization, and the manager's main function is to assist these employees in matters such as scheduling and securing necessary materials. This type of arrangement suggests that Savoir is an inverted organization. ⊚ true ⊚ false
356) Dion was confident that baseball fans would fill the seats in his brewhouse if they just knew about the place. After all, he offered convenience, easy walking distance to the local MLB stadium, great local talent for entertainment, and several fresh premium craft beers. He uses Twitter, Instagram, and Facebook to connect with potential customers, and offers free Wi-Fi within the restaurant. These are worthy strategies for reaching digital natives. ⊚ true ⊚ false
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357) Jun just started a managerial position at Westport Bank. In order to be more effective in his new position, he should try to learn who the important people are in the bank's informal organization. ⊚ true ⊚ false
358) During an afternoon coffee break, Iris, a production-line employee at Adventure Manufacturing, was told by a friend that one of the managers in finance is about to be fired. She is eager to learn if other friends at work know any more about the situation. This flow of information is an example of Adventure's grapevine. ⊚ true ⊚ false
359) Marshall Security Firm, a company that provides on-site security services for malls and other retail environments, needs to review current procedures used by its professional officers to make certain they are in compliance with new laws. On crucial issues such as this, it is more important to gather information through the informal organization, as opposed to the formal organization. ⊚ true ⊚ false
360) Charles just learned that several people throughout Ohio needed to be treated for food poisoning after eating peanut butter that was produced and jarred in his plant. As he walks the back stairs at the plant, he thinks to himself, "It's time to get the informal organization in on this. We've got to stop this in its tracks!" Charles is taking the right approach to solving this serious problem. ⊚ true ⊚ false
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Answer Key Test name: chapter 8 6) D 7) C 8) B 9) A 10) B 11) A 12) D 13) D 14) B 15) A 16) D 17) C 18) A 19) B 20) C 21) A 22) D 23) D 24) A 25) B 26) C 27) B 28) A 29) D 30) B 31) D
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32) D 33) B 34) C 35) A 36) C 37) C 38) B 39) C 40) D 41) A 42) D 43) B 44) D 45) C 46) B 47) D 48) D 49) B 50) A 51) D 52) B 53) D 54) C 55) A 56) C 57) A 58) B 59) B 60) D 61) A
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62) A 63) D 64) B 65) A 66) C 67) A 68) D 69) B 70) C 71) B 72) C 73) D 74) D 75) C 76) B 77) D 78) A 79) C 80) B 81) D 82) A 83) A 84) A 85) D 86) B 87) B 88) C 89) A 90) B 91) D
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92) B 93) C 94) B 95) C 96) D 97) C 98) A 99) D 100) A 101) D 102) D 103) A 104) B 105) C 106) D 107) C 108) B 109) D 110) D 111) B 112) D 113) C 114) B 115) A 116) D 117) B 118) A 119) B 120) C 121) A
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122) B 123) D 124) C 125) D 126) B 127) B 128) A 129) B 130) C 131) A 132) D 133) C 134) D 135) B 136) A 137) D 138) C 139) C 140) B 141) C 142) Section Break 142.1) B 142.2) C 142.3) A 142.4) D 142.5) C 143) TRUE 144) FALSE 145) TRUE 146) FALSE
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147) TRUE 148) TRUE 149) TRUE 150) TRUE 151) TRUE 152) FALSE 153) FALSE 154) FALSE 155) TRUE 156) FALSE 157) TRUE 158) FALSE 159) TRUE 160) TRUE 161) TRUE 162) FALSE 163) TRUE 164) TRUE 165) FALSE 166) FALSE 167) TRUE 168) FALSE 169) TRUE 170) TRUE 171) TRUE 172) TRUE 173) FALSE 174) TRUE 175) TRUE 176) FALSE
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177) TRUE 178) TRUE 179) FALSE 180) TRUE 181) FALSE 182) FALSE 183) TRUE 184) FALSE 185) FALSE 186) TRUE 187) FALSE 188) TRUE 189) TRUE 190) TRUE 191) FALSE 192) FALSE 193) TRUE 194) TRUE 195) TRUE 196) TRUE 197) TRUE 198) TRUE 199) FALSE 200) TRUE 201) TRUE 202) FALSE 203) FALSE 204) TRUE 205) TRUE 206) FALSE
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207) FALSE 208) TRUE 209) FALSE 210) TRUE 211) FALSE 212) TRUE 213) TRUE 214) TRUE 215) FALSE 216) FALSE 217) TRUE 218) FALSE 219) FALSE 220) TRUE 221) FALSE 222) TRUE 223) FALSE 224) TRUE 225) TRUE 226) TRUE 227) TRUE 228) FALSE 229) TRUE 230) FALSE 231) TRUE 232) TRUE 233) FALSE 234) TRUE 235) FALSE 236) TRUE
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237) FALSE 238) FALSE 239) FALSE 240) TRUE 241) TRUE 242) TRUE 243) FALSE 244) TRUE 245) TRUE 246) TRUE 247) FALSE 248) FALSE 249) TRUE 250) FALSE 251) TRUE 252) TRUE 253) FALSE 254) TRUE 255) FALSE 256) FALSE 257) TRUE 258) TRUE 259) TRUE 260) FALSE 261) TRUE 262) FALSE 263) TRUE 264) FALSE 265) FALSE 266) TRUE
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267) TRUE 268) TRUE 269) FALSE 270) TRUE 271) FALSE 272) TRUE 273) FALSE 274) FALSE 275) FALSE 276) TRUE 277) TRUE 278) TRUE 279) FALSE 280) TRUE 281) TRUE 282) TRUE 283) TRUE 284) TRUE 285) FALSE 286) FALSE 287) TRUE 288) FALSE 289) TRUE 290) TRUE 291) FALSE 292) TRUE 293) TRUE 294) FALSE 295) FALSE 296) FALSE
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297) FALSE 298) FALSE 299) FALSE 300) TRUE 301) TRUE 302) FALSE 303) TRUE 304) FALSE 305) TRUE 306) TRUE 307) TRUE 308) FALSE 309) TRUE 310) TRUE 311) TRUE 312) FALSE 313) TRUE 314) TRUE 315) FALSE 316) TRUE 317) FALSE 318) TRUE 319) TRUE 320) FALSE 321) TRUE 322) TRUE 323) TRUE 324) FALSE 325) TRUE 326) FALSE
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327) TRUE 328) TRUE 329) FALSE 330) TRUE 331) TRUE 332) TRUE 333) TRUE 334) FALSE 335) FALSE 336) FALSE 337) TRUE 338) TRUE 339) TRUE 340) TRUE 341) TRUE 342) FALSE 343) FALSE 344) FALSE 345) TRUE 346) TRUE 347) FALSE 348) TRUE 349) FALSE 350) FALSE 351) TRUE 352) TRUE 353) TRUE 354) FALSE 355) TRUE 356) TRUE
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357) TRUE 358) TRUE 359) FALSE 360) FALSE Student name:__________ 1) The selection of a proper site for a business facility is important in the production and operations management processes. Identify and discuss three factors that influence the selection of a site.
2)
How are MRP and ERP similar? How do they differ?
3) How has the emphasis of quality control changed in recent years? Describe some of the modern quality control techniques that illustrate this change in emphasis.
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4) PERT is a popular control method used by organizations. Explain the purpose of PERT analysis and describe the steps involved in constructing a PERT network. Your explanation should include a discussion of the significance of the critical path in a PERT network.
5)
What are the ISO 9001 and ISO 14001 standards? Why are they important?
6)
In recent years, the service sector of the U.S. economy has A) grown much more rapidly than the manufacturing sector. B) become the low-wage sector of the U.S. economy. C) declined significantly in productivity levels. D) focused less on quality and more on reducing costs of production.
7) Manufacturing output in the United States continues to increase. The high unemployment of skilled workers who previously worked in the manufacturing sector A) is the result of untrained laborers. B) is strictly a factor of U.S. manufacturing companies outsourcing the majority of their work. C) can be reconciled by the fact that manufacturing is very efficient and requires fewer workers to produce the same amount, or even more output. D) can be attributed to manufacturing going green.
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8)
In terms of industry and employment in the United States, it can be said that A) American industry employs more people today that it did a few decades ago. B) American industry will likely never employ as many people as it did in the 1950s. C) in today’s market, more people are employed in manufacturing jobs than service
jobs. D) the manufacturing industry appears to be returning to employment gains seen during the Industrial Revolution.
9)
To strengthen its manufacturing base in the future, the United States will have to A) uncover lower wage workers in the U.S. to compete with China. B) continue to innovate. C) support students in high school and college interested in studying the arts. D) cut the amount of benefits offered to workers.
10) According to the box “Reaching Beyond Our Borders,” Tesla was able to do the impossible feat of A) opening up a new auto plant in China in under 18 months. B) sending the first U.S. citizen to the moon. C) building an electric bicycle that can be recharged on solar power. D) building over 1 million vehicles each year.
11) At Common Core Inc., production line employees often work side-by-side with their robotic counterparts. This practice is also common among many of Common Core’s other American competitors. This demonstrates how the resurgence of U.S. manufacturing firms in recent years can be credited to
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A) the government's willingness to implement policies designed to protect U.S. firms from low-cost foreign competition. B) companies using hands-on manufacturing processes to guarantee quality. C) a number of significant changes in production techniques. D) a relaxation of government laws that has allowed manufacturing firms to merge more easily, thus achieving stronger market positions.
12) Production management is the traditional term used to describe all the activities managers do to help their firms create A) resources. B) goods. C) goodwill. D) equities.
13)
Operations management is a specialized area in management that converts resources into A) services, rather than goods. B) goods, rather than services. C) both goods and services. D) financial data.
14) __________ is the specialized area of management that converts or transforms resources into goods and services. A) Logistics management B) Resource engineering C) Intrapreneuring D) Operations management
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15) __________ is the creation of goods and services using land, labor, capital, entrepreneurship, and knowledge. A) Resource recombination B) Supply chain management C) Production D) Purchasing
16)
The U.S. economy is now driven by A) farming. B) manufacturing. C) services. D) trade.
17)
Operations management in the service sector is focused on creating A) good experiences for those who use the service. B) jobs for the local community. C) additional customer expectations. D) inexpensive ways to get things done.
18)
Experts in operations management for service industry businesses stress A) using records from accounting to determine what business to go after. B) relying on one's individual operation as opposed to developing partnerships. C) training employees to please customers by anticipating their needs. D) training employees to always adhere to only one way of doing things.
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19) The basic reason the term operations management is favored over the term production management is that A) the U.S. economy has moved toward a more socialist approach with government controlling a greater share of the production process. B) a much larger share of total output is being produced by nonprofit organizations. C) the United States is now largely driven by services rather than manufacturing. D) the United States now exports more than it imports.
20) Which statement best describes the distinction between production management and operations management? A) Production management involves activities managers perform to help create services while operations management involves the activities managers perform to produce goods. B) Production management involves activities managers perform to obtain physical resources while operations management involves the activities managers perform to obtain the financial resources. C) Production management involves activities managers perform to help create goods while operations management is a term that involves the activities involved in producing services as well as goods. D) Production management involves activities managers perform to help create intangible products while operations management involves the activities managers perform to produce tangible products.
21)
Which statement about operations management in the service sector is most accurate?
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A) Operations management in the service sector is all about providing the service at the lowest cost. B) Operations management in the service sector should focus on providing customers with a good experience. C) Operations management in the service sector has less flexibility than operations management in the manufacturing sector because services are not technology driven. D) Operations management in the service sector has done a good job of increasing output, but a poor job of improving quality.
22)
For most service businesses the quality standard has become A) providing prompt and predictable service. B) providing a competitive level of service at the lowest cost. C) pleasing customers by anticipating their needs. D) less important than it is for manufacturing businesses.
23) Jackson, a freshman just starting college, hasn't decided on his major. He is looking into operations management and is also exploring job opportunities in this field. Which statement about jobs for operations management majors is most accurate? If he majors in operations management, Jackson will A) have limited job opportunities because operations management positions are only available in the slowly growing manufacturing sector. B) acquire skills and knowledge that are valuable to firms in both the manufacturing and service sectors. C) have plenty of job offers, but they will mainly be in low-wage positions in the service sector. D) find plenty of employment opportunities in the government and education, but not very many in the private sector.
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24) The Royal Mark hotel chain offers restaurants with the finest service, elevators that run smoothly, and a front desk that checks people in quickly. Often, fresh-cut flowers are in the lobbies and dishes of fruit are in each room. __________ is responsible for implementing these customer benefits. A) Human resources management B) Direct sales management C) Operations management D) Production management
25) Every day, the Mealtime Grocery Store general manager reviews employee work schedules. This includes the late-night stock crew, the cashiers, the deli, produce, and meat department crews, and the management office personnel. He coordinates work schedules with shipments, as well as the information he collects from point-of-sale terminals that indicates the busiest hours at the store, and then he communicates any exceptions to his department managers. These daily tasks are part of A) operations management. B) promotions management. C) distributive management. D) marketing management.
26) So-Yung and Heidi just returned from a scuba diving and snorkeling trip in the Caymans. Both travelers highly recommended the resort where they stayed. Guest services were extremely prompt in assisting with diving excursions. All resort employees were trained to greet every guest each time they encountered them, whether it was on a pathway to the pools and beaches, or in the restaurants. Many times, the employees even referred to each guest by name. __________ in the service industry is about creating a good experience for customers. A) Enterprise resource planning B) Human resource planning C) Operations management D) Production management
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27)
Production activities that add value create A) time utility. B) possession utility. C) form utility. D) marginal utility.
28) __________ utility is the value added by the creation of finished goods and services using raw materials, components, and other inputs. A) Manufacturing B) Marginal C) Consumption D) Form
29)
In __________, materials are physically or chemically changed to produce a product. A) process manufacturing B) assembly processes C) utilitarian production D) diffusive manufacturing
30)
A(n) __________ puts together components to make a product. A) modular process B) compression process C) assembly process D) logistics process
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31) A production process characterized by long production runs to turn out finished goods over time is known as a(n) A) assembly process. B) continuous process. C) extended process. D) unrestricted process.
32) A production process characterized by a short production run and frequent adjustments to machines so that different products can be produced is known as a(n) A) just-in-time process. B) lean manufacturing system. C) analytic process. D) intermittent process.
33)
Most manufacturing facilities currently use A) continuous processes. B) intermittent processes. C) traditional processes. D) synthetic processes.
34)
In the past, the idea behind mass production was to A) produce goods of the highest possible quality. B) give producers the maximum flexibility to respond to customer preferences. C) make large quantities of a limited variety of products at very low cost. D) give workers more control over their work environment.
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35)
__________ uses computers to help design products. A) PERT B) GNI C) GDP D) CAD
36)
__________ involves using computers directly in the production process. A) CAD B) CAM C) GDP D) AMCAP
37) CAD/CAM makes it possible to custom-design products to meet the needs of __________ with __________. A) small markets; a decrease in cost B) very large markets; no increase in cost C) small markets; very little increase in cost D) international markets; products that are complex
38)
CAD has __________ productivity in many firms. A) unfortunately had no effect on B) actually decreased C) increased D) splintered
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39) Expensive software that enables computer-aided design machines to communicate with computer-aided manufacturing machines is called A) a flexible system. B) a computer-based feedback control system. C) computer-integrated manufacturing. D) heuristic manufacturing integration.
40) In __________, machines are designed to do multiple tasks so that they can produce a variety of products. A) systems engineering B) microdesign C) modular construction D) flexible manufacturing
41)
In manufacturing, one way to compete with cheap labor is to A) use robots. B) hire experienced people. C) make the production line longer. D) increase inputs to the system.
42)
The goal of lean manufacturing is to A) keep inventories of finished goods as high as possible. B) produce goods and services with less of everything that goes into the process. C) produce a very limited variety of goods. D) become more self-sufficient by producing major components rather than buying
them.
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43) __________ means tailoring products to meet the needs of a large number of individual customers. A) Mass customization B) Mass production C) Assembly-line finishing D) CAD/CAM
44) Which statement describes past processes that existed in manufacturing that negatively affected a firm's competitive advantage? A) Companies tended to produce a large quantity of the same product at a very low cost. B) Companies required their suppliers to only deliver the amount of good needed for a short-term production run. C) Companies changed their equipment too often, which created lost time on the job. D) Companies refused to train employees in technology and on machinery.
45)
Which statement about the impact of CAD/CAM on manufacturing is most accurate?
A) CAD/CAM is most useful to firms producing durable goods such as automobiles. B) CAD/CAM has replaced ERP as the most sophisticated resource planning technique. C) CAD/CAM allows firms to save money by replacing skilled labor with computers to perform all of the high-skill tasks. D) CAD/CAM has made it possible to produce custom-designed products with little increase in costs.
46)
A big advantage of computer-integrated manufacturing software is that it
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A) makes it possible to custom-design products to meet the needs of small markets while cutting the time needed to program machines. B) replaces "dumb" robots with "smart" computers. C) allows personal computers to communicate directly with the firm's server. D) controls all of the actions of the assembly line from a central location.
47)
A basic characteristic of flexible manufacturing is that it
A) relies heavily on labor, since humans are more adaptable than machines. B) uses machines designed to perform multiple tasks so they can be used to produce a variety of products. C) achieves its flexibility at the cost of much slower rates of production than mass production techniques. D) is only possible when using mass-production processes.
48) A company becomes lean by __________ its capacity to produce high-quality goods while __________ its need for resources. A) investigating; planning B) increasing; decreasing C) decreasing; increasing D) planning; investigating
49)
Lean manufacturing __________ productivity. A) increases B) decreases C) has no effect on D) removes the need for added
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50)
The main objective of lean manufacturing is to
A) keep labor costs as low as possible by expanding the use of other resources. B) produce products that have fewer frills and options in order to simplify the production process and keep costs as low as possible. C) produce goods using less of all types of resources. D) get state and local governments to handle many of the tasks currently performed by the firm.
51)
A benefit of CAD is A) it basically eliminates the need for human intervention. B) it saves on materials costs. C) it permits customization without a significant increase in price. D) it produces a higher quality product, which allows the manufacturer to charge more.
52) The use of __________ has increased productivity along the assembly line and within service-based businesses while simultaneously causing a reduction in jobs for people. A) robots B) generic products C) quality standards D) 3D printers
53) Someday, __________ could revolutionize the production of many items. For now, however, it is mostly used to create prototypes and molds.
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A) lean manufacturing B) 3D printing C) CAD D) CAM
54)
In the box “Adapting to Change” we read that robots excel at A) financial planning. B) customer communication. C) mundane, repetitive tasks. D) human resources.
55) From House to Home Inc. uses labor and machinery to transform wood, plastic, metal, and cloth into comfortable chairs, sofas, and love seats for the home. This process creates A) form utility. B) place utility. C) use facility. D) capital utility.
56) Spokes and Wheels Bike Company produces its bicycles according to customers' requests. What production process does this company most likely use? A) analytic B) just-in-time C) intermittent D) continuous
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57) Cool Wave Skateboards has 18 different skateboard models that can be created in over 2 million combinations. Each combination is designed to fit the needs of a specific customer. Therefore, the customer chooses the model, size, color, and design they want. An analysis of this company's operation would indicate that it uses A) lean manufacturing. B) flexible production. C) mass customization. D) continuous production.
58) DayDreamer Travel Inc. is a travel agency that specializes in destination wedding vacation packages. It has packages ranging from cruises to beach resorts all around the world. The customer chooses what they would like to pay, where they would like to visit, and what they would like to do. Based on this information, DayDreamer uses __________ to please its customers. A) CAD/CAM B) continuous production C) mass customization D) lean manufacturing
59) To make their famous Veggie Delite Sandwiches, Carrot Top Sandwich Shop finely slices in-season vegetables, stacks them on Italian bread, adds special seasonings, cheeses, and oils. The value added by Carrot Top when it combines these ingredients to make a sandwich is known as A) consumer surplus. B) the analytic function. C) marginal utility. D) form utility.
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60) Operations managers at All-Metal Corporation have found that they can achieve efficient production only by having very large quantities of steel available at all times. This indicates that All-Metal uses a(n) __________ production process. A) intermittent B) assembly C) continuous D) systematic
61) Melt-Away Creamery combines sugar, cream, and the best natural flavorings, then churns and freezes the resulting mixture at a very low temperature, creating ice cream. The method Melt-Away uses is an example of A) an analytic production system. B) process manufacturing. C) an assembly process. D) flexible manufacturing.
62) Extel Inc. acquires components to create its computers from an assortment of suppliers. The company then puts them together according to customer specifications to create custommade computers. This is an example of A) the assembly process. B) process manufacturing. C) synthetic production. D) continuous production.
63) Vari-Corp. Inc. manufactures machinery and robots that can assemble an assortment of cars and trucks including heavy duty pickup trucks, sports cars, luxury sedans, minivans, and multiple sizes of SUVs. Vari-Corp. sells products to companies that require
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A) micro-engineering. B) flexible manufacturing. C) continuous production. D) multiple output processing.
64) Allyce wants to find a way to cut back on labor and reduce her company's investment in tools and space, because she believes her firm uses more of all types of resources than is necessary. It seems that Allyce would like to adopt A) mass production. B) marginal cost management. C) lean manufacturing. D) flexible manufacturing.
65) The Ergo-First Furniture Company mass manufactures first-rate desks and chairs for executive offices. But now, the company is about to make a radical change in its production process. Customers will be able to provide specific measurements, select from a variety of fabric patterns, and answer some basic questions about the furniture styles they like, then design a chair and desk that are ergonomically designed for maximum comfort for their users. The new method Ergo-First will use is an example of A) just-in-time manufacturing. B) analytic production. C) mass customization. D) individualized production.
66) Your favorite photo can now be printed on your favorite credit card. You can design your own dresses online and have them sent to you in a few days. You can even create your own orthotics to fit inside your shoes. These are examples of the trend toward
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A) continuous processes. B) intermittent processes. C) mass customization. D) lean manufacturing.
67) Francis is a production and operations manager for a shoe company. He has been researching a system that will allow his company to take precise measurements from a customer and program machines to design and produce custom-cut footwear at little additional cost. This type of system is an example of the benefits of A) mass production. B) just-in-time production systems. C) the PERT method. D) CAD/CAM.
68) High-Five Inc. manufactures high-quality gloves and other accessories. It already uses both computer-aided design and computer-aided manufacturing. Unfortunately, the two systems cannot communicate with each other. Colleen, a production manager at High-Five, has heard about software that allows CAD and CAM to work together, and wants to learn more about it. Colleen is interested in A) linear programming software. B) mass customization. C) computer-integrated manufacturing. D) lean manufacturing.
69) Monica works for an architectural firm and the partners have always drawn the plans for projects by hand. Though Monica learned how to draw by hand in college, she is also highly skilled on computer programs that allow her to create designs in 3D. She plans to demonstrate the effectiveness of such programs to the firm's partners. The computer program she will recommend to the partners is
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A) CAD. B) CAM. C) CIM. D) SCM.
70)
__________ is the process of selecting a geographic location for a company's operations. A) Facility location B) Facility layout C) FRP D) Geographic requirements planning
71) What is a likely reason that a company would move its facility from one location to another? A) availability of expensive labor B) higher quotas on competing goods C) access to various modes of transportation D) availability of a retired workforce
72) Firms that have a goal of __________ tend to locate facilities with access to major highways, ports, railways, and airports. A) reducing time to market B) using ERP techniques C) replacing labor with machinery D) switching to a more service-oriented product mix
73)
One reason contemporary producers and their suppliers locate close together is
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A) to share the same labor. B) to foster customer taste and preferences. C) to decrease the cost of distribution. D) to minimize the use of CAD/CAM systems.
74) A major trend in business is __________, where employees work at least part-time at home using a computer. A) outsourcing B) riveting C) outbounding D) telecommuting
75) Operations management becomes a(n) __________ when suppliers work closely together to design, produce, and ship products to customers. A) open operation B) closed operation C) interfirm process D) conjoined process
76)
__________ is the physical arrangement of resources in the production process. A) Facility location B) Facility layout C) ERP D) RRL
77)
Modular facilities layouts consist of
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A) teams of workers who work together on a complex assembly. B) lines of workers who do a small series of tasks and then pass along the product through the line to the next worker. C) virtual companies and their supplier relationships. D) workers who have a model in front of them that they try to replicate several times.
78) Firms often use a(n) __________ when working on a major project involving the production of a large item such as an airplane, ship, or bridge. A) assembly line layout B) continuous production process C) fixed-position layout D) process manufacturing technique
79) Unlike an assembly line where workers perform only a few tasks, in a __________ layout, teams of workers combine to perform a variety of tasks needed to produce more complex units of a final product. A) modular B) spoke and wheel C) network D) cluster
80) In manufacturing, a(n) __________ is used to produce large quantities of a few types of products. A) assembly-line layout B) process layout C) modular layout D) fixed-position layout
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81) In manufacturing, a(n) __________ is frequently used in operations that serve customers' different needs. A) product layout B) process layout C) modular layout D) fixed-position layout
82)
An example of a(n) __________ is building a new home on a lot. A) product layout B) process layout C) modular layout D) fixed-position layout
83) The operations planning practice of using sales forecasts created by a computer to accurately predict the amount and timing of materials needed to complete products and projects is A) enterprise resource planning. B) materials requirement planning. C) virtual accuracy tool. D) computer-based materials model.
84)
MRP is a technique that helps managers A) develop a reliable sales forecast. B) schedule the sequence of tasks workers must perform in order to complete a project. C) determine how many workers are needed to staff various departments. D) make sure that the right parts and materials are available at the right time.
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85)
MRP is the acronym for A) minimum resource payments. B) maximized revenue potential. C) managed resource priorities. D) materials requirement planning.
86)
ERP is the acronym for A) educated rights planning. B) extensive research planning. C) enterprise resource planning. D) equal requirements planning.
87) __________ is a computer application that enables a firm to combine computerized functions of all divisions and subsidiaries of the firm into a single, integrated software program that uses a single database. A) Materials requirement planning (MRP) B) PERT analysis C) Manufacturing resource planning (MRP II) D) Enterprise resource planning (ERP)
88) __________ is the operations management planning function that searches for quality material resources, finds the best suppliers, and negotiates the best price. A) Marketing B) Finance C) Bartering D) Purchasing
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89) __________ has transformed the purchasing function in recent years by helping firms find the best suppliers and the best prices. A) PERT B) The Internet C) CAD/CAM D) QFD
90) With the __________ inventory control system, producers hold only the amount of materials and parts that they need for a short period of time, sometimes just a few hours. A) ABC B) first-in, first-out (FIFO) C) just-in-time (JIT) D) CAD
91)
To reduce the cost of holding too much inventory, many companies have implemented A) ABC inventory management. B) first-in, last-out inventory control. C) just-in-time inventory control. D) CAD inventory management.
92) Maintaining __________ involves producing what the customer wants while reducing errors before and after delivery to the customer. A) manufacturing control B) efficiency C) CAD/CAM D) quality
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93)
In today's quality control programs, emphasis is placed on A) producing goods at the lowest possible cost. B) keeping labor costs as low as possible. C) achieving customer satisfaction. D) detecting errors at the end of the production process.
94)
The Six Sigma approach to quality control
A) relies on a special team of experts to examine every unit of output at the end of the production process. B) detects potential problems early to prevent their occurrence. C) views quality control as a function of the marketing department. D) allows only 600 defective units per one thousand units produced.
95) __________ examines statistical samples of product components at each stage of the production process and plots the results on a graph in order to spot and correct any variances from desired quality levels. A) CAD/CAM B) Econometrics C) Analysis of variance D) Statistical process control
96)
The Deming Cycle is
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A) a checklist that enables managers to evaluate employee performance more systematically. B) a systematic method of evaluating potential facility locations. C) a process for finding potential quality errors before they occur. D) a process for using identical production steps in the creation of different types of products.
97) The __________ National Quality Award is given to firms that achieve an outstanding level of overall quality based on performance in seven key areas. A) Association of Operations Managers B) Excellence in Production Committee C) National Association of Manufacturers D) Malcolm Baldrige
98) __________ is a set of international standards for quality management and assurance standards. A) EPA 2001 B) ISO 14001 C) ISO 9001 D) TQM 2013/2014
99) __________ standards are concerned with the best practices for managing an organization's environmental impacts. A) EPA 2001 B) ISO 14001 C) Eurogreen 701 D) Enviro 2001
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100)
What is an important aspect of operations management? A) determining the best means of financing the firm's operations B) developing the best advertising strategy to promote a firm's products C) deciding whether to pay a dividend to the firm's stockholders D) choosing the best location for a firm's facilities
101) Which statement best describes the impact of recent advances in information technology on business location decisions? A) Advances in information technology give firms a greater incentive to locate near big cities, because that is where they can take full advantage of these advances. B) Western states tend to benefit the most from improvements in information technology, because most states in this region have invested heavily in Internet technology. C) Advances in information technology will have no real effect on location decisions. D) Advances in information technology will give firms more flexibility in their location decisions by reducing the need to locate close to sources of labor.
102)
Which statement about facility location is most accurate?
A) Only service firms are influenced by labor costs when making decisions about where to locate. B) Recent changes in information technology have led firms to favor locations near major urban areas. C) Manufacturers often seek to reduce time-to-market by locating facilities in areas with access to key modes of transportation. D) No matter how large they become, most companies ultimately choose to locate major facilities within a few miles of the area in which they started business.
103) Which statement best reflects the approach state and local governments take to influence the location decisions of businesses?
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A) State and local governments often engage in fierce competition to attract businesses, including the offer of tax breaks, zoning changes, and financial aid. B) State and local governments try to avoid competition with other areas, because such competition usually backfires and creates ill will. C) State and local governments no longer pursue new businesses because they have found that attempts to attract businesses are usually too expensive to justify the results. D) State and local governments work primarily through the federal government and the Small Business Administration to obtain financial assistance for firms seeking to locate in their area.
104)
Which statement is most accurate regarding facility layout?
A) Most manufacturing firms are turning to an assembly line layout to produce output as efficiently as possible. B) For service firms, the main objective in facility layout usually is to centralize the control of operations. C) Facility layout is important for manufacturing plants because facilities layout decisions can have a huge impact on the firm's costs. D) In a modular layout, workers are assigned a specific station along an assembly line and specialize in performing a specific task.
105) Contemporary operations management planning is an interfirm process. An interfirm process is A) a process that must integrate all of the functional units of a firm's operation, including production, marketing, finance, and logistics. B) a process that uses a confidential plan, not shared with suppliers or customers, which stays within the firm. C) a process where several firms work closely together to design, produce, and ship products to customers. D) a process that seeks stability by adhering to top-down management.
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106) Enterprise resource planning (ERP) goes beyond the capabilities of materials requirement planning (MRP) because it A) gives much more precise cost estimates. B) finds the critical path and computes its length. C) monitors the computerized functions of all the divisions and subsidiaries of the firm in a single software program. D) handles research data about more than one product at the same time.
107)
A just-in-time inventory system helps a producer reduce costs by A) expanding the number of suppliers available to a producer. B) accessing the lowest-priced parts at all times. C) limiting the amount of parts on hand for later use. D) limiting the amount of emissions into the environment.
108)
In a just-in-time inventory system, suppliers A) deliver materials and parts in large quantities only a few times a year. B) enjoy much lower delivery costs. C) have a great deal of flexibility in determining when to make deliveries. D) are usually connected electronically so they know what will be needed and when.
109)
A firm would be most likely to employ statistical process control (SPC) if it wanted to
A) simplify the quality control process by taking samples at the end of the production process rather than examining every unit of output produced. B) eliminate the expenses incurred by the Deming Cycle. C) redefine quality control on the basis of customer needs. D) make sure products meet quality standards all along the production process.
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110) A firm that is certified as meeting both ISO 9001 and ISO 14001 standards has demonstrated A) world-class management of both quality and environmental standards. B) sound financial and marketing practices. C) ethical treatment of both customers and employees. D) that its recruitment and training programs for employees protect and promote basic human rights.
111) According to the box “Making Ethical Decisions: Loyalty or Profitability?," a firm must give its employees __________ before closing and/or moving to another location. A) bonuses equal to 1½ times their regular monthly pay B) two weeks’ notice C) transfer options D) 60 days' notice
112)
The main idea in the box “Making Ethical Decisions: Loyalty or Profitability?" indicates
A) a need for firms to place a higher level of importance on time-to-market when choosing facilities locations. B) that the goal of finding the lowest cost location should never be overshadowed by other concerns if the firm is to remain loyal to its stockholders. C) that many locations do not meet ISO 14001 standards. D) a need for firms to consider the economic impact of their existence and/or departure from a particular location.
113) It’s Eveline’s job to locate the highest quality materials from the best suppliers and negotiate for the best price. What is Eveline’s job?
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A) purchasing B) forecasting C) marketing D) printing
114) At Red Brick Manufacturing Corp., similar equipment and functions are grouped together to achieve maximum efficiency. Depending on what type of brick is being produced, the product visits a particular manufacturing function in a particular order that is different for each type of brick. This is an example of a(n) __________ layout. A) fixed position B) process C) modular D) assembly-line
115) As businesses strive for market expansion, companies add to their sales force, but opt to eliminate sales offices across the nation and internationally. How are these firms able to remotely operate a sales force that contributes toward increasing the bottom line? A) A sensible strategy is to transport sales professionals to the world headquarters on a bi-weekly basis. B) The business strategically moves manufacturing facilities to low-cost areas and allocates more funds toward the sales professionals to meet face-to-face with management. C) The operation is maintained with an advanced MRP system. D) The operation is managed with teleconferencing information technology, and telecommuting.
116) Enviro-Sharp Inc. is a leading producer of environmentally-friendly cleaning agents. As they've outgrown their current facility, Enviro-Sharp is looking for a new site. The company is mainly focusing on sites that are close to major highways and railways and are not too far from the majority of the area's population. This suggests that an important location consideration for Enviro-Sharp is
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A) quality of life. B) access to cheap land. C) reducing time-to-market. D) access to low-cost labor.
117) WayOut Industries is a U.S.-based manufacturer of sporting goods. It recently decided to make a major push to sell its products in the EU. In order to succeed in this new market, WayOut Industries will need to A) become certified in ISO 9001 standards. B) convert its financial assets into euros. C) avoid reliance on the Deming cycle. D) reduce the wages of its production workers.
118) At Williams Manufacturing, workers are organized in teams that combine their efforts to produce complex units of a final product. Williams is using a facility layout known as a(n) A) consolidated process layout. B) continuous flow layout. C) modular layout. D) assembly team layout.
119) For the past two years, Tek-Ride Bike Company used suppliers from India, Japan, and Malaysia to provide precision parts for its custom bikes. There was only one problem: the quality of the parts from all locations lacked precision and consistency. The quality control manager convinced the owners to partner with a slightly higher-priced company in Omaha, Nebraska, which utilized __________ to test samples of product components at each stage of production for deviations in quality and precision, prior to sending them to Tek-Ride Bike Company. The bike company realized savings in both time and money.
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A) statistical process control B) just-in-time inventory control C) lean manufacturing D) flexible manufacturing
120) Production manager Edwin Reynolds wants to link all the divisions and subsidiaries of his firm's computerized functions into a single, integrated software program that uses a single database. In order to achieve this goal, Edwin could make use of A) enterprise resource planning. B) manufacturing resource planning. C) program evaluation and review techniques. D) Gantt charts.
121) Staffing Supplies' largest customer recently implemented a just-in-time inventory system. As a supplier of materials to this customer, Staffing Supplies will A) realize significant freedom in scheduling deliveries. B) likely increase its effort and likely experience higher transportation costs. C) place less emphasis on quality and greater emphasis on quantity. D) need to deliver large quantities at regularly scheduled intervals.
122) One of Sanjay’s largest international customers is Rolling Waves in Ireland. He got a call from his contact at Rolling Waves, "This is a heads-up! Top management is asking operations to review our vendors for ISO 14001 compliance." Sanjay’s company should prepare to demonstrate
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A) an acceptable level of quality standards of the products and services it provides. B) a level of quality in its products and services that exceeds its competitors. C) a world-class management system in information technology and lean manufacturing. D) best practices for managing its impact on the environment.
123) __________ is a technique to analyze and sequence tasks involved in completing a project, to estimate the time needed to complete each task, and to determine the minimum amount of time needed to complete each project. A) PERT B) ECON C) LIFO D) GANTT
124)
In a PERT network, the sequence of tasks that takes the longest to complete is called the A) optimal path. B) maximum path. C) straight path. D) critical path.
125)
The purpose of a PERT network is
A) to monitor the quality of a product for compliance with ISO 9001 standards. B) to monitor the progress of a multi-step project during its development. C) to connect all firms that are ISO 9001 certified so that they can partner with each other on future projects. D) to evaluate the environmental impact of a product.
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126) A bar graph that shows what projects or tasks are in process and how much of each is completed is called a A) grid chart. B) Gantt chart. C) priority chart. D) stem chart.
127) What would be most helpful to a production manager who wanted to determine the minimum time required to complete a proposed project? A) TQM B) CAD/CAM C) ERP D) PERT
128)
The first step in the development of a PERT chart is
A) assigning an estimated cost to each task. B) analyzing the tasks and determining the sequence in which they must be performed. C) estimating the time needed to complete each task. D) identifying the probabilities that each step in the project can be successfully completed without exceeding the estimated cost.
129)
The purpose of determining the critical path on a PERT network is to A) identify the sequence of tasks that takes the longest to complete. B) estimate a payment schedule so that a budget can be established. C) find the sequence of events that is the most expensive to complete. D) establish a delivery schedule for a just-in-time inventory control program.
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130)
Both PERT diagrams and Gantt charts are useful to managers concerned with A) calculating the rate of profit earned in a particular market. B) making sure that projects are completed on time. C) estimating the cost of completing a project. D) establishing formal lines of authority and responsibility within an organization.
131) Jamie is a development engineer for a manufacturer of solar panels for both residential and commercial purposes. Her company uses PERT network software for all development projects. As she assesses her timeline for completing a new panel the company plans to introduce for the agriculture industry, Jamie will need to focus on A) ISO 14001 standards. B) the priority bar of the PERT chart. C) marketing efforts for promotion. D) the critical path of the PERT network.
132) A PERT network consists of activities linked by arrows. Suppose two of the activities on the network are labeled "A" and "B." An arrow from "A" to "B" indicates that A) the same resources used to complete "A" are also used to complete "B." B) "A" and "B" can be completed at the same time. C) "A" takes longer to complete than "B." D) "A" must be completed before "B" can begin.
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133) While planning a new product launch, Manny knew that the art department was ready to work on the promotional pieces right away. But they are not able to start until the strategy group established the price point and the purchasing group obtained the paper needed to make the promotional piece. Establishing price points would take about a week and was dependent on manufacturing getting the costs to the strategy group. This was expected a week from today. The purchasing group indicated the paper could be obtained locally the same day it was requested. Based on this information and assuming things go according to plan, when will the art department be able to begin work on the promotional pieces? A) 1 day B) 1 week C) 2 weeks D) 1 month
134) Nick was planning a new product launch. He knew that the art department was ready to work on the promotional pieces now, but they couldn't start until the marketing strategy group established the price point and the purchasing department obtained the paper needed to design the promotional piece. Establishing price points would take about a week and was dependent on manufacturing getting the costs to the marketing strategy group. This was expected a week from today. The purchasing group indicated the paper could be obtained locally the same day it was requested. Assuming things go as planned and based on this information, which task could be as much as a week late without jeopardizing the deadline for the entire project? A) marketing strategy's determination of the price point B) manufacturing's determination of the costs C) obtaining the paper D) the art department taking a month-long vacation
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135) Review the PERT Network that follows. If it takes 1, 2, or 3 weeks for each activity (represented by a box) to be completed, the critical path is represented by
A) the path that begins with "Start" and continues with all boxes labeled with No. 1. B) the path that begins with "Start," continues with all boxes labeled with No. 2, and concludes with "Finish." C) the path that begins with "Start," continues with one box labeled with No. 2, proceeds with all boxes labeled with No. 3, and concludes with "Finish." D) the path that begins with "Start," continues with all boxes labeled with No. 1, and concludes with "Finish."
136) Gwen is a production and operations manager and loves details. She likes to keep track of how projects are moving along. One of Gwen’s favorite tools is a bar graph that shows how much work has been completed on the projects that are currently under way and which processes are behind schedule. Gwen likes to use a(n) A) CAD/CAM diagram. B) input-output graph. C) Gantt chart. D) Targeted Completion Date (TCD) graph.
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137) Sparky Weyer, president and CEO of Minimotors Inc., a growing manufacturer of small (some of them downright tiny) electric motors used in a variety of power tools and appliances, told potential investors, "These are exciting times for our company. We've made a lot of changes over the past two years that have really improved our operations and lowered our costs. Now we are ready to expand into new markets. Minimotors is on its way to becoming a global player." Sparky was meeting with potential financial backers in an effort to obtain funding for some expensive new machinery he wanted to purchase. "You may have heard about some of the ways we've cut costs," Sparky continued. "We've developed a new arrangement with several of our biggest suppliers. They've agreed to make more frequent deliveries tied directly to our production schedules. This will help us reduce our inventory costs dramatically. We've also greatly reduced the number of defective motors we produce by carefully keeping tabs on all of our manufacturing processes. In fact, we have set a goal of reducing our defects to 3.4 parts per million. The main purpose of my meeting with you today is because we want to install some sophisticated new machinery and software that will allow us to quickly design and produce motors to the exact specifications of our customers. The machinery is computer-controlled and can produce custom-designed products at very little increase in cost compared to our massproduced motors. We feel this flexibility and quick response time will give us a tremendous competitive advantage and help us attract new customers. Installing the new equipment and training our workers to use it properly will be a complex project, but I'm confident that once we get everything up and running we'll be able to strengthen our position as the leading maker of high-quality electric motors."
137.1) One of Sparky's goals is to expand globally. He is most interested in doing business with the nations of the EU. In order to do business with the European Union, Sparky's company should A) gain ISO 9001 certification. B) make sure his production workers all belong to an international union. C) put more emphasis on low cost rather than product quality. D) buy at least 50 percent of its supplies from countries belonging to the European Union.
137.2) The arrangements Minimotors has worked out with its suppliers to reduce the amount of inventory the company holds at any one time show that it is committed to a(n)
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A) priority inventory scheduling system. B) first in, first out inventory processing system. C) just-in-time inventory control system. D) CAD/CAM inventory system.
137.3) The equipment and software Sparky wants to purchase will allow the computers used to design motors to be linked directly to the computer-aided equipment on the factory floor. Sparky is proposing to set up a(n) A) modular manufacturing system. B) computer-integrated manufacturing system. C) E-hub that relies on network software to control the production process. D) first-in, first-out production system.
137.4) In order to schedule deliveries, Minimotors's suppliers need detailed information about when parts are needed. Minimotors will purchase a computer application that will link its operation to sales forecasts to make sure needed parts and supplies are available at the right time to meet customer demands. This planning system is known as A) materials requirement planning (MRP). B) program evaluation and review technique (PERT). C) minimum daily requirements scheduling (MDRS). D) sales-based requirements forecasting (SBRF).
137.5) Sparky sees quality control in terms of detecting potential problems to prevent their occurrence and thus save Minimotors money. The quality control process that is most closely linked to Sparky's goal is known as
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A) Six Sigma. B) ISO 9001. C) ERP. D) PERT analysis.
137.6) Sparky knows that installing the new equipment and training workers to use it efficiently will be a long and complex process consisting of many different tasks. Which method would help him determine how long this project is likely to take? A) TPSM (task priority scheduling method) B) DA (dependency analysis) C) TRSS (task and resource scheduling system) D) PERT (program evaluation and review technique)
137.7) While Minimotors has focused on improving production efficiencies, global customers are inquiring about its environmental policies. In light of its strategy to serve customers in the EU, Sparky has requested two of its lead engineers to investigate what it would take to meet the environmental standards of its socially responsible customers. The engineers should investigate __________ as best practices for managing a firm's impact on its environment. A) PERT B) ISO 14001 C) RG3 Regulations D) ISO 9001
138) Today, due to technological advancements, manufacturers in the United States have become so efficient, they require fewer workers to produce the same amount of output. ⊚ true ⊚ false
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139) One key to the resurgence of U.S. service firms as world-class competitors is the implementation of a focus on quality. ⊚ true ⊚ false
140) Evidence suggests that U.S. manufacturing firms can no longer compete against the best firms in the rest of the world. ⊚ true ⊚ false
141) American manufacturers have emphasized continuous improvement as one strategy for regaining a competitive advantage in the manufacturing sector. ⊚ true ⊚ false
142)
To strengthen its manufacturing base, the United States will need to continue to innovate. ⊚ true ⊚ false
143) The United States is still manufacturing intensive. Only 40% of U.S. jobs come from the service sector. ⊚ true ⊚ false
144) Since U.S. manufacturing competes on price throughout the world, innovation plays a very small part in the U.S. economy.
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145) Even though the number of factory workers in the United States has decreased, the level of output has increased. ⊚ true ⊚ false
146) As the service industries became a larger part of U.S. GDP, companies have become more concerned about measuring productivity in the service sector. ⊚ true ⊚ false
147) U.S. manufacturers are focusing on quality as a way to become more competitive globally. ⊚ true ⊚ false
148) The box “Reaching Beyond Our Borders” noted that Tesla production in Germany would be stalled if the company failed to relocate a colony of bats that inhabited the property Tesla wanted to build on. ⊚ true ⊚ false
149) In the past, production management was about using the factors of production to create finished goods. ⊚ true ⊚ false
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150)
Operations management converts resources into goods and services. ⊚ true ⊚ false
151) In the process of operations management, a firm transforms resources such as raw materials, supplies, and even human resources into goods and services. ⊚ true ⊚ false
152) Operations management involves inventory management, quality control, and production scheduling. ⊚ true ⊚ false
153)
Land and labor are examples of factors of production. ⊚ true ⊚ false
154)
Automobile manufacturers produce goods and provide services. ⊚ true ⊚ false
155) Operations management in service industries is about creating a good experience for the customer. ⊚ true ⊚ false
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156) Operations management moves from knowing the needs of consumers to actually satisfying those needs. ⊚ true ⊚ false
157) The quality standard for service industries such as luxury hotels is creating artificial demand. ⊚ true ⊚ false
158) Service businesses know that in order to satisfy customers they must be able to anticipate their needs. ⊚ true ⊚ false
159) One important issue with respect to managing the operation of a business is to make certain that customers leave feeling as though they had a good experience with your service and with your company in general. ⊚ true ⊚ false
160) Manufacturing companies are only concerned with production management, while service companies are only concerned with operations management. ⊚ true ⊚ false
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161) Firms that specialize in accounting, finance, and management consulting are all part of the service sector. ⊚ true ⊚ false
162) An important strategy in operations management is using technology to anticipate customer needs. ⊚ true ⊚ false
163) Operations management transforms resources into goods and services. Perfect Cut Landscaping utilizes equipment, labor, and materials to develop a top-notch landscape for its customers. Managing this operation may also involve maintenance services. ⊚ true ⊚ false
164) Sasha just graduated with a degree in operations management. While earning his degree, the knowledge he gained and skills he developed could make him an attractive employee for both a manufacturing firm and a service firm. ⊚ true ⊚ false
165) Jeremy is a manager at Graphite Works, a manufacturing firm in Arkansas. His responsibilities include production scheduling as well as keeping tabs on the company's inventory. These duties suggest that Jeremy is involved in promotions management. ⊚ true ⊚ false
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166) As you're loading your groceries on the conveyor belt, the clerk asks if you found everything you needed. As she continues to scan your purchases, coupons for future purchases print near the cashier's terminal. In reviewing the key concepts from this chapter, you would consider this action to be part of the store's management of its labor. ⊚ true ⊚ false
167) Jen Thompson is majoring in operations management at a local university. Unfortunately, the evolution of the United States from a manufacturing-oriented to a service-oriented economy means that Jen will not likely find job openings in her field of study. ⊚ true ⊚ false
168)
When firms successfully transform materials into products, they create form utility. ⊚ true ⊚ false
169)
Only firms in the manufacturing sector can create true form utility. ⊚ true ⊚ false
170) The three basic requirements of production are: (1) creating a finished good, (2) making sure you created it at the lowest cost possible, and (3) selling it. ⊚ true ⊚ false
171) The value added by the creation of finished goods and services from inputs is called ownership utility. ⊚ true ⊚ false
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172) Process manufacturing refers to combining components and raw materials to make a product. ⊚ true ⊚ false
173)
Process manufacturing physically or chemically alters materials to create finished goods. ⊚ true ⊚ false
174)
A continuous production process is used to evaluate inventory levels. ⊚ true ⊚ false
175) An automobile assembly production line is characterized by long production runs that turn out finished goods over time. ⊚ true ⊚ false
176) Intermittent production processes are characterized by short production runs and frequent changes of machinery in order to produce different products like customized furniture. ⊚ true ⊚ false
177)
Contemporary manufacturers lack the flexibility to use intermittent production processes. ⊚ true ⊚ false
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178) One drawback of intermittent production processes is that they tend to be much slower than continuous processes. ⊚ true ⊚ false
179)
The production process requires inputs, outputs, and production controls. ⊚ true ⊚ false
180) Mass production techniques allow firms to respond quickly to the individual needs of consumers. ⊚ true ⊚ false
181) One of the reasons mass production techniques lost favor is that, despite their ability to keep costs relatively low, mass production lacks flexibility. ⊚ true ⊚ false
182) The ability to use computers to design and manufacture products has had a major impact on production techniques in recent years. ⊚ true ⊚ false
183) CAD/CAM has made it possible to custom-design products to meet the tastes of small markets with very little increase in cost.
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184)
true false
CAD systems allow designers to use 3D modeling software. ⊚ true ⊚ false
185) Despite its early promise, computer-aided design has not met with much success in increasing productivity. ⊚ true ⊚ false
186) The purpose of computer-integrated manufacturing (CIM) is to unite computer-aided design with computer-aided manufacturing. ⊚ true ⊚ false
187) The advantage of computer-integrated manufacturing software is that it allows computeraided design machines to communicate directly with computer-aided manufacturing machines. ⊚ true ⊚ false
188) So far, the high cost of CAD/CAM techniques has limited their use to large, expensive manufactured goods such as automobiles. ⊚ true ⊚ false
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189) Flexible manufacturing systems use machines that are designed to do a multitude of tasks so that they can produce a variety of goods. ⊚ true ⊚ false
190) A disadvantage of flexible manufacturing systems is that they usually require a great deal of hands-on labor because machines are rarely capable of handling a wide variety of tasks. ⊚ true ⊚ false
191) Flexible manufacturing allows a company to include a special order without slowing down the production process. ⊚ true ⊚ false
192) Lean manufacturing is a strategy of producing standardized products that have no frills or extra features in order to keep prices low. ⊚ true ⊚ false
193) Companies that achieve lean manufacturing use less of everything (raw materials, labor, etc.) to produce the same amount of products. ⊚ true ⊚ false
194) Technological improvements are largely responsible for the increase in productivity and efficiency of U.S. plants. ⊚ true ⊚ false
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195)
The higher productivity of U.S. plants is due largely to technological improvements. ⊚ true ⊚ false
196) Mass customization is tailoring products to meet the needs of a large number of individual customers. ⊚ true ⊚ false
197) Mass customization is a strategy of convincing customers to choose from a relatively small number of alternatives in order to achieve the efficiencies of mass production. ⊚ true ⊚ false
198)
While mass customization works well for producers it is not used in the service sector. ⊚ true ⊚ false
199)
Another name for 3D printing is offline manufacturing. ⊚ true ⊚ false
200) Nanomanufacturing is when materials can be manipulated on a molecular or even atomic level. ⊚ true ⊚ false
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201) Companies that employ lean manufacturing and flexible manufacturing produce better quality products but have costlier production lines. ⊚ true ⊚ false
202) When a company has the ability to produce the same amount of goods with only half the floor space and half the labor that it used in the past, the firm is practicing flexible manufacturing. ⊚ true ⊚ false
203) Improvements in technology have significantly increased the quality of products as well as helped reduce costs. ⊚ true ⊚ false
204) Manufacturers use computer-aided manufacturing (CAM) to create three-dimensional designs of products before they are built. ⊚ true ⊚ false
205) Mass customization is not exclusive to product-intensive businesses. Service businesses have also learned how to use mass customization to serve their customers. ⊚ true ⊚ false
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206) Businesses that provide services typically cannot use mass customization because services are not tangible products that can be customized. ⊚ true ⊚ false
207) Process manufacturing involves taking raw materials and physically or chemically changing them into another form, while the assembly process takes the newly changed form and turns it back into the original form. ⊚ true ⊚ false
208) The main difference between process manufacturing and an assembly process is that process manufacturing uses sophisticated robots and automated machinery to produce a good or service, while an assembly process uses labor and simple tools to make a product. ⊚ true ⊚ false
209)
Land, labor, capital, and knowledge are inputs into the production process. ⊚ true ⊚ false
210) Although lean manufacturing attempts to reduce the amount of labor used in the manufacturing process, it typically does so by customizing products to specific tastes. ⊚ true ⊚ false
211) In the box “Adapting to Change” the food industry is discussed as a prime candidate for using robots to improve efficiencies. ⊚ true ⊚ false
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212) Computers and robots are only useful in continuous production processes where the same type of product is produced many times. ⊚ true ⊚ false
213) To make its dry ice, Keep-It-Cold Ice Company compresses carbon dioxide and cools it to an extremely low temperature. Keep-It-Colds’ method is an example of process manufacturing. ⊚ true ⊚ false
214) Relax-Out-Back Furnishings specializes in producing custom-made patio furniture. The most efficient process for Relax-Out-Back to utilize would be a continuous production process. ⊚ true ⊚ false
215) Klein Manufacturing creates large batches of standardized products used by electricians, such as wiring and switches that must be produced in standard sizes. A continuous production process would work well for Klein Manufacturing. ⊚ true ⊚ false
216) Fashion Group Inc. is a specialty manufacturer that produces custom jewelry according to customer specifications. Fashion Group should probably use an intermittent process in production. ⊚ true ⊚ false
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217) Rick and Marissa recently started a company focused on rehabbing houses. Before they buy a house, they use software to create and design the renovation of each room. The program provides them with an estimate of how much of each kind of material is needed, and the orderly progression of tasks that need to be completed. Rick and Marissa use computer-aided design. ⊚ true ⊚ false
218) Steer Surround Inc. is a manufacturer of steering wheel grips and is located about 8 miles from two major auto assembly plants. Every two days, Steer Surround delivers grips to each of the plants. The assembly plants only accept the number of grips that they will use in cars during the next 48 hours after delivery. The auto plants embrace lean manufacturing. ⊚ true ⊚ false
219) Betty’s Better Butter Bakery makes an assortment of cookies and candies for corporate accounts and restaurants. On a good day, Betty’s receives orders for 600 to 800 custom cookies. The bakers can quickly change the cookie cutting machine to reflect the orders for the day, while computers program the ovens to bake each cookie to perfection. Refrigeration is also computer controlled. Betty’s embraces flexible manufacturing and mass customization. ⊚ true ⊚ false
220) Facility location is the process of selecting a geographic location for a company's operations. ⊚ true ⊚ false
221) When considering the issue of facility location, it is important to find an isolated location so that work can get done without interruption from customers.
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222) Operations management planning is concerned with finding the ideal location for a business and also with materials requirement planning. It leaves decisions about purchasing and inventory control to marketing. ⊚ true ⊚ false
223) When it comes to location decisions, labor costs are no longer an important consideration for most manufacturing firms. ⊚ true ⊚ false
224) Access to inexpensive resources is one reason a firm might decide to move its production facilities. ⊚ true ⊚ false
225) Manufacturing firms that want to minimize time-to-market are likely to choose facility sites that give them easy access to their preferred modes of transportation. ⊚ true ⊚ false
226) Some companies will locate their production facilities near their suppliers to make communication easier, even though it does not usually cut the cost of distribution. ⊚ true ⊚ false
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227) Many state and local governments offer tax incentives and government services to attract businesses. ⊚ true ⊚ false
228) In making a location decision, businesses seldom consider "quality of life" for their workers in various locations, because factors that influence quality of life have little or no impact on profits. ⊚ true ⊚ false
229) Online-focused strategies don't affect operations managers since it is not essential for operations managers to negotiate in an interfirm environment. ⊚ true ⊚ false
230)
For many firms, operations management has become an interfirm process. ⊚ true ⊚ false
231) Facility layout is the function of operations management that considers the physical arrangement of resources (including people) in the production process. ⊚ true ⊚ false
232) For service-intensive businesses, facility layout is usually designed to centralize the decision-making process.
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233) Telecommuting has diminished in popularity as a strategy for linking employees with work. ⊚ true ⊚ false
234) The production of a bridge, ship, or large airplane usually involves a variable-position facility layout. ⊚ true ⊚ false
235) The process layout simplifies production by using the same sequence of processes regardless of the design of the item being produced. ⊚ true ⊚ false
236)
In an assembly-line manufacturing layout, workers do only a few tasks at a time. ⊚ true ⊚ false
237) In a modular manufacturing layout, teams of workers combine to produce more complex units. ⊚ true ⊚ false
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238) A process manufacturing layout is frequently used in operations that serve customers' different needs. ⊚ true ⊚ false
239) Facility layout decisions will depend upon the processes that are to be accomplished in the firm's operation. ⊚ true ⊚ false
240) Materials requirement planning (MRP) enables a firm to make sure that the right amount of each material or component is available at the right time to satisfy its production needs. ⊚ true ⊚ false
241) Materials requirement planning relies on the firm's balance sheet to make sure that the right quantities of finished goods are produced. ⊚ true ⊚ false
242) One limitation of materials requirement planning (MRP) is that it is not a computer-based approach. ⊚ true ⊚ false
243) Enterprise resource planning (ERP) is simpler and less sophisticated than manufacturing resource planning (MRP). ⊚ true ⊚ false
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244) Enterprise resource planning (ERP) combines all the computerized functional units of a firm into a single software program used in the production of goods and services. ⊚ true ⊚ false
245) ERP software enables multiple firms to collectively manage all their operations based on a single, integrated set of corporate data. ⊚ true ⊚ false
246) The purchasing function involves searching for quality resources and finding the best suppliers, as well as negotiating the best price for the needed items. ⊚ true ⊚ false
247) Online companies have transformed the way businesses find the best supplies at the best prices. ⊚ true ⊚ false
248)
One aspect of the purchasing function is product promotion. ⊚ true ⊚ false
249) The ability to purchase supplies on the Internet has reduced the time and dollar cost of the purchasing function.
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250) The purchasing function of operations management seldom uses the Internet to make purchasing decisions. ⊚ true ⊚ false
251) The primary characteristic of a just-in-time inventory system is that suppliers deliver parts and materials right at the time that the buyer is going to use them in the production process. ⊚ true ⊚ false
252) The concept just-in-time (JIT) works well if a company works with lots of suppliers. It also helps avoid the breakdowns that occur when operating with an enterprise resource planning system. ⊚ true ⊚ false
253) In a just-in-time inventory system, the producer holds large quantities of the materials and components used in the production process in its inventory to ensure that it always has enough on hand. ⊚ true ⊚ false
254) A just-in-time inventory system typically decreases the need for a warehouse but increases the costs of production. ⊚ true ⊚ false
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255) In JIT inventory systems a manufacturer normally communicates its production plans to suppliers so that they can deliver needed parts and materials just in time for the manufacturer to use them. ⊚ true ⊚ false
256) Quality control is a continual process of checking to make certain that there is consistency in the quality of products being produced. ⊚ true ⊚ false
257) Six Sigma is a benchmark of quality standards that many product and service industries try to achieve. ⊚ true ⊚ false
258) The idea behind the Six Sigma quality standard is to detect potential problems, in order to prevent their occurrence. ⊚ true ⊚ false
259)
Six Sigma is a quality measure that allows only 3.4 defects per million opportunities. ⊚ true ⊚ false
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260) A key element of the statistical quality control (SQC) process is the focus on quality control experts to inspect at the end of the production line to make sure that no defective products are shipped to final customers. ⊚ true ⊚ false
261) Statistical quality control (SQC) is the process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning of the production process. ⊚ true ⊚ false
262) Statistical process control (SPC) is the process of taking statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards. ⊚ true ⊚ false
263)
The Deming Cycle is designed to catch errors before they happen. ⊚ true ⊚ false
264)
The Deming Cycle approach to quality control consists of: Plan, Do, Check, Act. ⊚ true ⊚ false
265)
It’s easier to apply quality control standards to physical goods than to services. ⊚ true ⊚ false
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266) If a company achieves Six Sigma quality standards, they automatically win the Malcolm Baldrige award. ⊚ true ⊚ false
267) The Baldrige standards measure a firm's quality in several key areas including planning, leadership, and customer and market focus. ⊚ true ⊚ false
268)
ISO is a worldwide, nongovernmental federation that sets global measures of quality. ⊚ true ⊚ false
269) The International Organization for Standardization continually updates acceptable international requirements in the areas of process control, product testing, storage, and delivery. ⊚ true ⊚ false
270)
ISO 9001 refers to a set of international standards for quality management and assurance. ⊚ true ⊚ false
271) ISO 14001 is a new set of product quality standards that has replaced the old ISO 9001 standards. ⊚ true ⊚ false
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272) The European Union demands that all firms that want to do business with its member nations must satisfy ISO 9001 standards. ⊚ true ⊚ false
273) ISO 14001 is a collection of the best practices for managing an organization's impact on the environment. ⊚ true ⊚ false
274) Firms that satisfy the ISO 9001 and ISO 14001 standards have demonstrated a worldclass management system in both quality and environmental standards. ⊚ true ⊚ false
275) One valid criticism of modern production planning methods such as ERP and MRP is that there is no way to use recent advances in information technology (IT) with these systems. ⊚ true ⊚ false
276) Recent developments in information technology will discourage companies from allowing employees to telecommute. ⊚ true ⊚ false
277)
Labor costs play a minor role when selecting a facility location.
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278) When manufacturers are determining their facility location, time to market is not typically a concern. ⊚ true ⊚ false
279) The decreased use of enterprise resource planning (ERP) reflects the fact that firms are not interested in combining the computerized functions of all divisions and subsidiaries of a firm. ⊚ true ⊚ false
280) A major advantage of a just-in-time inventory system is that it guarantees an ample supply of component parts are readily available. ⊚ true ⊚ false
281) Today, one of the best ways to maintain consistently high quality in the production process is to give a group of specialists in a separate quality control department the authority to inspect each product at the end of the production process. ⊚ true ⊚ false
282) Operations managers have learned that quality control is not a never-ending process. Just before you add packaging to the finished product, official company inspectors do a random spotcheck. All inspections have to occur at the end of a production run because only then can the inspector see the total finished product in order to determine if quality is jeopardized. ⊚ true ⊚ false
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283) According to the box “Loyalty or Profitability?,” Trust Us Industries could potentially increase profits by 20 percent if it moves production to Vietnam, but that move would have an indirect effect on other businesses in the community. ⊚ true ⊚ false
284) Tyler, an operations manager for a smartphone manufacturer, just accepted a new operations position with a service company. Tyler will find that operations management at the new job will differ significantly from operations management at the manufacturer. ⊚ true ⊚ false
285) Isabelle grew up fishing with her father. Inspired by her love of fishing, she started an online company specializing in her favorite fishing gear. She located the business near Kentucky Lake, partly because of low labor costs, but mainly because the area offered excellent fishing opportunities, a low crime rate, and a pleasant climate. Isabelle’s location decision was strongly influenced by quality of life considerations. ⊚ true ⊚ false
286) Alice is an operations manager at a local housekeeping service. She is recommending that her firm make better use of the Internet so its services are more readily available to its customers. Alice’s recommendation reflects a growing trend in service-sector firms. ⊚ true ⊚ false
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287) JetFirst Aeronautics was recently awarded a contract to build a large lab module that will be attached to a new space station. The module is approximately 48 feet long, 17 feet in diameter, and weighs over 60 tons. JetFirst should use the growing-in-popularity assembly-line plant layout to produce this module. ⊚ true ⊚ false
288) Peterson Brothers Manufacturing recently redesigned its facility layout to group similar equipment and functions together. This allows flexibility in the sequence in which products are produced using these functions. Peterson Brothers' new layout is an example of the fixedposition layout. ⊚ true ⊚ false
289) RTS Computer Group wants to set up a planning system that will integrate its production and operations system with those of its suppliers. As its operations management consultant, you explain that it needs a material requirement planning (MRP) system. ⊚ true ⊚ false
290) Northwest Automotive currently uses an ERP system to manage all of its production operations and coordinate them with the other operations of the company. The company also wants to implement a just-in-time (JIT) inventory system. Unfortunately for Northwest Automotive, ERP is incompatible with JIT, so if it adopts the new inventory system it will have to abandon ERP. ⊚ true ⊚ false
291) The Byts Inc. is a major supplier of components used by Gamer Group Inc. Gamer Group is looking to implement a just-in-time inventory system. The Byts should benefit from this approach since JIT systems greatly simplify the task of suppliers.
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292) In an effort to improve the quality control process at the Midwest Solar Corporation, management is introducing the importance of the Deming Cycle to employees. This suggests that managers are aware of the need to find potential problems before they occur. ⊚ true ⊚ false
293) Carson Group Appliances is in the process of trying to achieve ISO 14001 certification. Although the criteria for certification involve several milestones, we can be assured they will be evaluated on the regularity and thoroughness of their environmental audits, and how well top management reviews the firm's adherence to policies that are environmentally friendly. ⊚ true ⊚ false
294) In the Net Inc., a sporting goods company, and RightWay Community College are interested in following the lead of other companies and implementing criteria that will lead toward receiving the Baldrige Award. As their advisor, you emphasize that focusing on the measurement of customer satisfaction is one important area where both will need to excel. ⊚ true ⊚ false
295) Giuseppe’s Gelato, a large ice cream producer on the east coast of the United States, wants to license firms in Europe to produce and sell its products. We can conclude that this is good strategy if it wants to save the money it would cost to be ISO 9001 certified because the EU (European Union), unlike U.S. firms, has not yet adopted these standards. ⊚ true ⊚ false
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296) Edges and Middles Corp. produces jigsaw puzzles. The quality of its materials and the calibration of machines that cut and fit pieces of a puzzle are extremely important if it is to eliminate defects and meet customer specifications. If the company meets or exceeds Six Sigma criteria, it will have no more than 60 defects per million puzzles. ⊚ true ⊚ false
297) A major purpose of the program evaluation and review technique (PERT) is to identify the minimum time needed to complete a project. ⊚ true ⊚ false
298)
The end result of PERT analysis is an estimate of the total cost of completing a project. ⊚ true ⊚ false
299) The critical path identified by PERT analysis is the sequence of tasks that can be completed in the shortest amount of time. ⊚ true ⊚ false
300) PERT is a popular technique for analyzing the tasks involved to complete a given project, estimating the time required to complete each task, and identifying the minimum time needed to complete the project. ⊚ true ⊚ false
301) An advantage of PERT charts is that they are usually so simple to draw that a computer is not needed.
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302) In a PERT network, a critical path is the sequence of tasks that takes the longest time to complete. ⊚ true ⊚ false
303) Compared to PERT networks, Gantt charts provide a more basic way to track progress on a given project. ⊚ true ⊚ false
304) A Gantt chart is a bar graph showing production managers what projects are being worked on and the stage of development at any given time. ⊚ true ⊚ false
305) The significance of the critical path on a PERT chart is that it identifies the least costly method of producing a given product. ⊚ true ⊚ false
306)
The first step in the PERT method is to assign a cost to each activity. ⊚ true ⊚ false
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307) The PERT network provides a project manager with a plan that puts all the activities of a project in the correct order that they must be accomplished, shows which activities can be accomplished simultaneously, and also gives the manager a good estimate of how long each activity will take to complete. ⊚ true ⊚ false
308) Gantt charts will show the production manager if certain activities in the production process are lagging behind their acceptable time of completion. ⊚ true ⊚ false
309) Jillian is a construction manager who needs to determine how long a project will take to complete and which tasks in the project have the greatest potential for delaying her project. The PERT chart will help Jillian answer these questions. ⊚ true ⊚ false
310) Mason is in charge of a complex project. He wants to see how all the different activities involved in completing the project are related to each other. One way to illustrate these relationships would be to construct a PERT chart. ⊚ true ⊚ false
311) Marisol is a production manager and often refers to a bar graph that shows what activities are being worked on, and how much of each task has been completed on a daily basis. Marisol is using a Gantt chart. ⊚ true ⊚ false
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312) Review the PERT Network below: If it takes 2 weeks for each activity (represented by a box) to be completed, it can be determined that the boxes labeled with No. 1 create the critical path because this path of activities takes the shortest time to complete.
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Answer Key Test name: chapter 9 6) A 7) C 8) B 9) B 10) A 11) C 12) B 13) C 14) D 15) C 16) C 17) A 18) C 19) C 20) C 21) B 22) C 23) B 24) C 25) A 26) C 27) C 28) D 29) A 30) C 31) B
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32) D 33) B 34) C 35) D 36) B 37) C 38) C 39) C 40) D 41) A 42) B 43) A 44) A 45) D 46) A 47) B 48) B 49) A 50) C 51) C 52) A 53) B 54) C 55) A 56) C 57) C 58) C 59) D 60) C 61) B
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62) A 63) B 64) C 65) C 66) C 67) D 68) C 69) A 70) A 71) C 72) A 73) C 74) D 75) C 76) B 77) A 78) C 79) A 80) A 81) B 82) D 83) B 84) D 85) D 86) C 87) D 88) D 89) B 90) C 91) C
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92) D 93) C 94) B 95) D 96) C 97) D 98) C 99) B 100) D 101) D 102) C 103) A 104) C 105) C 106) C 107) C 108) D 109) D 110) A 111) D 112) D 113) A 114) B 115) D 116) C 117) A 118) C 119) A 120) A 121) B
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122) D 123) A 124) D 125) B 126) B 127) D 128) B 129) A 130) B 131) D 132) D 133) C 134) C 135) C 136) C 137) Section Break 137.1) A 137.2) C 137.3) B 137.4) A 137.5) A 137.6) D 137.7) B 138) TRUE 139) TRUE 140) FALSE 141) TRUE 142) TRUE 143) FALSE 144) FALSE
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145) TRUE 146) TRUE 147) TRUE 148) TRUE 149) FALSE 150) TRUE 151) TRUE 152) TRUE 153) TRUE 154) TRUE 155) TRUE 156) TRUE 157) FALSE 158) TRUE 159) TRUE 160) FALSE 161) TRUE 162) TRUE 163) TRUE 164) TRUE 165) FALSE 166) FALSE 167) FALSE 168) TRUE 169) FALSE 170) FALSE 171) FALSE 172) FALSE 173) TRUE 174) FALSE
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175) FALSE 176) TRUE 177) FALSE 178) FALSE 179) TRUE 180) FALSE 181) TRUE 182) TRUE 183) TRUE 184) TRUE 185) FALSE 186) TRUE 187) TRUE 188) FALSE 189) TRUE 190) FALSE 191) TRUE 192) FALSE 193) TRUE 194) TRUE 195) TRUE 196) TRUE 197) FALSE 198) FALSE 199) FALSE 200) TRUE 201) FALSE 202) FALSE 203) TRUE 204) FALSE
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235) FALSE 236) TRUE 237) TRUE 238) TRUE 239) TRUE 240) TRUE 241) FALSE 242) FALSE 243) FALSE 244) TRUE 245) FALSE 246) TRUE 247) TRUE 248) FALSE 249) TRUE 250) FALSE 251) TRUE 252) FALSE 253) FALSE 254) FALSE 255) TRUE 256) TRUE 257) TRUE 258) TRUE 259) TRUE 260) FALSE 261) TRUE 262) TRUE 263) TRUE 264) TRUE
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265) TRUE 266) FALSE 267) TRUE 268) TRUE 269) TRUE 270) TRUE 271) FALSE 272) TRUE 273) TRUE 274) TRUE 275) FALSE 276) FALSE 277) FALSE 278) FALSE 279) FALSE 280) FALSE 281) FALSE 282) FALSE 283) TRUE 284) FALSE 285) TRUE 286) TRUE 287) FALSE 288) FALSE 289) FALSE 290) FALSE 291) FALSE 292) TRUE 293) TRUE 294) TRUE
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295) FALSE 296) FALSE 297) TRUE 298) FALSE 299) FALSE 300) TRUE 301) FALSE 302) TRUE 303) TRUE 304) TRUE 305) FALSE 306) FALSE 307) TRUE 308) TRUE 309) TRUE 310) TRUE 311) TRUE 312) FALSE Student name:__________ 1) Describe the contributions of scientific management to improving worker productivity. What are some of the limitations of this approach?
2) Why did the results of the studies conducted at the Hawthorne plant surprise Elton Mayo and his fellow researchers? How did these results change the direction of management research?
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3) Describe and compare the basic contributions of Maslow and Herzberg to the understanding of worker motivation.
4) Compare the assumptions Theory X makes about employees with those of Theory Y. How do these different assumptions influence management styles?
5) What is the key idea behind goal-setting theory? How does management by objectives help implement this idea?
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6) Explain how managers could motivate employees by using expectancy theory. Create a story/example of expectancy theory at work, incorporating the three questions that employees will ask according to expectancy theory.
7) List the generations in the workplace today and provide at least two characteristics of each generation that affect their motivation.
8) The personal satisfaction people feel when they have done a job well is a(n) __________ reward. A) cognitive B) extrinsic C) physiological D) intrinsic
9) Rewards in recognition of good work that come from someone else are __________ rewards. A) conditional B) intrinsic C) extrinsic D) secondary
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10)
__________ is considered the “father” of scientific management. A) Elton Mayo B) Frank Gilbreth C) Henry Gantt D) Frederick Taylor
11) One of the elements essential to Frederick Taylor's approach to improving worker productivity was A) teamwork. B) a hierarchy of needs. C) rules of work. D) open communication.
12) Frank and Lillian Gilbreth developed the principle of __________, which said that every job could be broken down into a therblig. A) motion economy B) marginal productivity C) division of labor D) self-actualization
13) __________ was the dominant strategy for improving worker productivity during the early 1900s. A) Management by objective B) Scientific management C) Social Darwinism D) Job enrichment
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14) Frederick Taylor came to the conclusion that tasks could be improved based on the tools used to complete the task. He learned this by conducting A) lighting studies. B) pay studies. C) time-motion studies. D) self-actualization studies.
15) Frank and Lillian Gilbreth thought that every job could be broken down into a series of elementary motions that they called A) therbligs. B) elementary steps. C) micromotions. D) lillifranks.
16) According to the principles of scientific management, the best way to improve productivity is to A) give employees greater recognition for their efforts. B) establish open two-way communications among all employees and managers. C) find the best method of doing each job, then teach those methods to employees. D) use job rotation and job enlargement to make work more interesting and challenging.
17) Which statement is the best description of how scientific management viewed employees?
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A) Employees are like machines that must be properly programmed. B) Most employees are creative and intelligent individuals who should be given a great deal of freedom and flexibility in how they perform their jobs. C) Employees will only exert their maximum effort if they believe that their goals are attainable. D) Employees are individuals who respond more positively to intrinsic awards.
18) Brendan has just successfully negotiated a new long-term sales agreement with a major client. The personal satisfaction Brendan has about his efforts represents a(n) __________ reward. A) external B) extrinsic C) intrinsic D) reciprocal
19) Christa’s supervisor was so impressed with her efforts in the marketing program that he named her the employee of the month. This praise from her supervisor is an example of a(n) __________ reward. A) extrinsic B) intrinsic C) secondary D) extraneous
20) The CEO of CompCore often honors employees who have demonstrated the company's core values. CompCore holds a conference each year where one employee is honored in several values categories that include (1) challenge; (2) move fast; (3) be open and straightforward. By providing __________ rewards once each year, CompCore sends the message to all employees that these are important values.
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A) equality B) valued C) intrinsic D) extrinsic
21) All new employees at Prime Line Manufacturing are specifically trained to use the most efficient production methods. After extensive training, they are placed on an assembly line and expected to perform the same task day after day, using the methods they were taught. The work is boring, but the pay is good. Prime Line’s approach is consistent with the principles of A) management by objectives. B) expectancy theory. C) scientific management. D) human engineering.
22) Tomas is a professional landscaper. During the busy season, he hires college students to help complete his jobs. Tomas explains his system for maintaining a customer’s lawn to the students, and he expects them to follow his instructions exactly. Tomas’s approach is consistent with the ideas of A) Peter Drucker. B) Frederick Herzberg. C) William Ouchi. D) Frederick Taylor.
23)
The Hawthorne studies concluded that worker motivation
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A) increased when managers applied the scientific management approach. B) was most affected by monetary incentives. C) improved when employees felt like their ideas were respected. D) was mainly determined by physical working conditions.
24) The Hawthorne studies were conducted by __________ and his colleagues from Harvard University. A) Henry Gantt B) Elton Mayo C) Peter Drucker D) John Hawthorne
25)
The original goal of the Hawthorne studies was to determine A) the average IQ of production employees. B) whether employees could work effectively in unsupervised teams. C) the level of illumination that was associated with optimum productivity. D) how to stimulate employees to be more creative.
26) The tendency for people to behave differently when they know they are being studied is known as the A) Hawthorne effect. B) Taylor effect. C) self-actualization effect. D) time-motion effect.
27)
The Hawthorne studies found that employees in the experimental group
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A) performed much better under bright lighting than they did when lighting was dim. B) were more productive than other employees regardless of the level of lighting. C) were more creative when working individually than they were when working in teams. D) performed poorly because they were distracted by all of the attention they received.
28) The findings of the Hawthorne studies led researchers to look more closely at how __________ could lead to better productivity. A) changes in salary and benefits B) disciplinary factors and punishment C) changes in physical working conditions D) the human side of motivation
29)
What was the most important impact of the Hawthorne studies?
A) It helped managers find the level of lighting associated with optimum productivity. B) It showed that employees could be programmed like machines to perform simple repetitive tasks, and thus led to the development of assembly lines. C) It changed the direction of research away from Taylor's scientific management toward the study of human-based management. D) It showed that physical working conditions have no impact on worker productivity.
30) In the Hawthorne studies, employees were involved in the planning of the experiments. What did this cause employees to do? A) set rather simple, easily attainable goals B) become distracted and thus reduced productivity C) believe that management respected their ideas, which motivated them D) have high levels of productivity, but show disrespect for the managers in their test area
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31) Which statement about worker motivation is most consistent with the findings of the Hawthorne studies? A) Worker motivation will fall significantly if lighting conditions, temperature, and other elements of the physical environment are not kept at their optimal levels. B) Employees are more motivated if they feel they are part of a special group or project. C) The best way to motivate employees is to offer pay raises, bonuses, and other financial incentives. D) Worker motivation is not important in determining the level of worker productivity because productivity is primarily determined by external factors such as the speed of the machinery the employees operate.
32) Dr. Sanders, a Milltown University sociology professor, is studying the factors that affect employee motivation. Dr. Sanders is concerned that the study results may be misleading because employees in an experimental group tend to behave differently when they know they are being studied. This concern shows that Dr. Sanders is aware of the A) Hawthorne effect. B) Taylor effect. C) principle of motion economy. D) Heisenberg principle.
33) Which statement would Elton Mayo most likely have made soon after concluding his Hawthorne studies?
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A) Employees at Superior Technologies are not lazy, but they normally lack direction and respond best to an autocratic style of management. B) The key to increasing productivity at Superior Technologies is to provide employees with the best possible physical working conditions. C) When Superior Technologies' employees are put into an isolated group, their natural tendency is to compete against each other and establish a "pecking order." D) At Superior Technologies, employees who enjoy their work environment and believe they are respected are likely to be more productive employees.
34) The concept that a hierarchy of human needs could be used to explain motivation was developed by A) Abraham Maslow. B) Frederick Taylor. C) Douglas McGregor. D) Frederick Herzberg.
35)
Maslow was mainly concerned with explaining how
A) jobs could be broken down into very simple tasks that could be performed by unskilled employees. B) human motivation was related to a hierarchy of needs. C) managerial assumptions about employees affected their style of management. D) to achieve open two-way communication within an organization.
36)
According to Maslow, a higher-order need A) always provides greater motivation than a lower-order need. B) never provides as much motivation as a lower-order need. C) becomes a source of motivation after lower-order needs are satisfied. D) does not require the support of lower-level needs.
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37)
Maslow classified the needs for basic items such as food, water, and shelter as A) safety needs. B) esteem needs. C) physiological needs. D) self-actualization needs.
38)
Maslow called the needs people have for security at work and at home A) physiological needs. B) stability needs. C) insurance needs. D) safety needs.
39)
In Maslow's hierarchy of needs, the desire to be considered part of the group is a A) social need. B) physiological need. C) safety need. D) self-actualization need.
40) Maslow would classify the need for recognition from others and for self-respect as __________ needs. A) social B) esteem C) security D) physiological
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41) In Maslow's hierarchy, __________ needs refer to the desire to reach one's fullest potential. A) social B) esteem C) egoistic D) self-actualization
42)
Maslow placed __________ needs at the highest level of his hierarchy. A) self-actualization B) esteem C) deferred D) social
43)
Abraham Maslow thought that once needs at one level of his hierarchy were met, A) motivation would diminish. B) another, higher-order need would emerge to motivate that person. C) that type of need would never again be an effective motivator. D) an individual would become more interested in lower-level needs.
44) According to Maslow's hierarchy of needs theory, which of these issues reflects a lowerorder need? A) The need for a challenging project at work. B) The need for a promotion at work. C) The need for a mentor to help you ascend within the company. D) The need to install security software on your work computer.
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45) The social worker explained to the group of foster parents that all children want to feel accepted and loved. Which of the needs in Maslow’s hierarchy does this describe? A) self-actualization B) esteem C) physiological D) social
46) Larissa accepted a new job and moved to Denver where she didn’t know anyone. She was delighted to hear she had the opportunity to play on the company pickleball team. She quickly made new friends and, through her new friends, learned about her new city. Apparently, her new job satisfies Larissa’s __________ needs. A) social B) esteem C) self-actualization D) physiological
47) Until a recent incident, Connor had always been very pleased with his part-time job at a local gas station. During one of his shifts, the store was burglarized. Although no one was hurt, Connor now feels anxious and fearful during his late-night shift. Management needs to be aware of Connor’s unmet __________ needs. A) esteem B) self-actualization C) physiological D) safety
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48) Dillon dropped out of school and needs to support himself, though he has few skills. He is a part-time employee at a convenience store earning minimum wage. Dillon wants to earn more but hasn't been able to find a better job since he is without the right qualifications. He is having a hard time paying his rent and his mounting bills. He even started to skip breakfast to save on food costs. Dillon is having trouble meeting his A) esteem needs. B) self-actualization needs. C) social needs. D) physiological needs.
49) Selena has worked for the Sunshine Fruit Company for several years now and was recently recognized as one of the company's best employees. Her coworkers respect and admire her, and she feels good about herself. Based on Maslow’s hierarchy, the type of needs that are likely to motivate Selena in the future are A) social needs. B) self-actualization needs. C) physiological needs. D) safety needs.
50) Corinne’s work productivity and performance on the job are very good. Recently, however, her ability to get to work on time has affected her job performance. Her manager has documented a number of unrelated health issues that have prevented Corinne from arriving at work on time. Which view would Maslow likely share with Corinne’s supervisor? A) A lack of socialization on the job may increase an employee's health-related issues. B) Self-actualization needs are not being met by this employer. C) Hygiene factors such as good pay are obviously not present through this employer. D) Lower-order needs such as physiological needs must be met before higher-order needs.
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51) Brent has a good job and can afford an apartment with comfortable furniture and plenty of food. But because of political unrest and street violence in his town, he is considering uprooting himself and applying for a visa to move to another country. According to Maslow, Brent’s concern reflects a desire to satisfy his A) physiological needs. B) safety needs. C) social needs. D) self-actualization needs.
52) Sanjay emigrated to the United States three months ago where he found a job working on an assembly line at an electronics manufacturer. When he came to the United States, Sanjay left his friends and family behind. Now he is lonely and hopes that his fellow employees will accept him so that he can build some lasting friendships. According to Maslow, Sanjay is looking to satisfy his A) physiological needs. B) safety needs. C) social needs. D) self-actualization needs.
53) Melissa has been an assistant at Star Equity Bank for more than 14 years. She earns a good salary and has made friends at work, but she has been passed over for promotion twice and feels that no one appreciates her abilities and skills. Melissa is concerned with satisfying her A) physiological needs. B) social needs. C) safety needs. D) esteem needs.
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54) Treena completed her Ph.D. program. Although she has a secure teaching job at an urban college, she does not hold a faculty position at a prestigious university. It is obvious to her colleagues that Treena is unsatisfied with her position at work. She constantly gives coworkers subtle reminders of her superior academic credentials. Looking at Treena’s situation using Maslow's hierarchy of needs, which level of needs is unmet? A) self-actualization B) esteem C) social D) physiological
55) Several advocacy groups in theUnited States monitor firms that do business with sweatshops in developing nations. These watchdog groups are concerned about human rights abuses in foreign factories, often citing unsafe and unclean working conditions. Recently, business experts have shed new light on this issue, stating that these factories that do not meet the standards of developed nations are still perceived by their workers as a better way of life than what they had before because these employers offer steady wages. According to Maslow, these workers are motivated to satisfy which of his hierarchy of needs? A) self-actualization needs B) social needs C) safety needs D) physiological needs
56) __________ studies were designed to answer the question, “What creates enthusiasm for workers and make them work to full potential?” A) William Ouchi’s B) Frederick Taylor’s C) Douglas McGregor’s D) Frederick Herzberg’s
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57) Herzberg's research identified several __________ factors that were related to the job environment and did not necessarily motivate employees if they were increased but could cause employees to become dissatisfied if they were missing or inadequate. A) retroactive B) inferior C) hygiene D) negative
58) Herzberg found that factors that provided the highest level of motivation were mostly associated with A) job content. B) level of pay. C) general working conditions. D) the style of management.
59)
Herzberg found that an employee’s salary A) was the strongest motivator. B) was a significant motivator, but not as important as job security. C) was a hygiene factor rather than a motivator. D) had no effect on worker attitudes.
60) According to Herzberg, a sense of achievement, earned recognition, and interest in the work itself were all A) important motivators. B) hygiene factors. C) ways for employees to meet their social needs. D) consistent with his Theory X approach to motivation.
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61)
Herzberg's research found that the factor that ranked highest as a motivator was A) the friendliness of supervisors. B) a sense of achievement. C) a compensation system that included bonuses and regular pay raises. D) the presence of clear and consistent company rules and policies.
62) According to Herzberg, job-related factors that motivated workers to work harder and more productively had one thing in common: A) they were easy to explain and easy to measure. B) they focused on making the jobs performed by employees simpler to accomplish. C) they were related to job content. D) they allowed more productive employees to receive higher compensation.
63)
Herzberg's research found that safe working conditions and good pay
A) are important motivators for most employees. B) helped maintain worker satisfaction but did little to increase motivation. C) had no impact on worker morale. D) were very important motivators for professional employees and managers but were poor motivators for unskilled employees.
64) According to Herzberg's views, which strategy would be most likely to result in a higher level of worker motivation? A) providing workers with ergonomic seating B) posting a listing of work rules and policies C) giving an employee more responsibility in decision-making D) using time-motion studies to find the most efficient techniques for employees to use
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65) While Maslow's research categorized a person's needs in terms of higher-order and lower-order needs, Herzberg's research recognized that A) employees aspire to satisfy lower-order needs at work and higher-order needs through other life activities. B) certain work-related factors satisfied higher-order needs, while other work-related factors satisfied lower-order needs. C) the physical environment and general working conditions were of no consequence to employees. These factors did not affect higher- or lower-order needs. D) hygiene factors satisfied higher-order needs and motivating factors satisfied lowerorder needs.
66)
According to Herzberg, the difference between motivators and hygiene factors is
A) motivators cause persons to work smarter, while hygiene factors cause people to work harder. B) hygiene factors make employees more enthusiastic about the work itself, whereas motivators make employees enthusiastic about their next day off. C) hygiene factors develop more loyalty from workers, while motivators make workers enthusiastic about moving on to a different company. D) motivators relate to job content, while hygiene factors have little effect on employee motivation.
67) According to Herzberg, which group of motivational factors would give employees the most satisfaction?
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A) A B) B C) C D) D
68) Ari, a recent graduate with a degree in chemical engineering, just landed his first job as a field engineer with a company that provides maintenance for oil and chemical companies. Although he will be traveling to many job sites during the first five years, many of his new colleagues remarked on the opportunities for growth and promotion and added responsibilities if he persevered with this company. Based on Herzberg’s theory, what benefits are Ari’s colleagues referring to? A) hygiene factors B) needs factors C) motivators D) safety factors
69) Micah, the CEO of All-Time Fitness, often brags that her company pays the highest salaries in the industry, has excellent working conditions, and has clear and consistent company policies. She also admits that her workforce is not highly motivated. Herzberg's research suggests that All-Time Fitness is having difficulty motivating its employees because it focuses on A) interactive factors. B) motivating factors. C) altruistic factors. D) hygiene factors.
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70) Madison Electric encourages its employees to further their education by reimbursing them up to $7,500 per year for tuition and related expenses. The company also recognizes employee achievements at an annual company picnic and year-end party. Talented employees are given promotions and added responsibilities. These policies suggest that management at Madison Electric is using the findings of A) Frederick Herzberg to increase worker motivation. B) William Ouchi to implement a Theory Z approach to management. C) Frederick Taylor to improve worker productivity through the principles of scientific management. D) Abraham Maslow to satisfy lower-order needs of employees.
71) __________ used the terms Theory X and Theory Y to describe different attitudes managers have about employees. A) Robert Colby B) Elton Mayo C) Douglas McGregor D) Victor Vroom
72) Douglas McGregor described two very different sets of managerial attitudes about employees, which he called A) the positive view and the negative view. B) the macro perspective and the micro perspective. C) Theory X and Theory Y. D) individualism and collectivism.
73) Theory __________ managers see employees as people who avoid responsibility and have little ambition.
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A) A B) X C) Y D) Z
74) Theory __________ assumes that the average person likes work and has a relatively high degree of imagination and creativity. A) A B) Alpha C) X D) Y
75)
Theory Y managers prefer A) closely supervising their employees. B) exerting a strong degree of control over employees. C) letting employees set their own objectives. D) motivating employees through fear.
76)
William Ouchi called the management approach typically used by Japanese firms A) Type X. B) Type J. C) Type Q. D) Type Y.
77) __________ is the term William Ouchi used to refer to the management approach typically used by firms in the United States.
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A) Type A B) Theory Z C) Theory Q D) Theory J
78) To be competitive, __________ recommended that U.S. firms adopt a new management style that was a hybrid of the approaches used by Japanese firms and those used by American firms called __________. A) Mi Yurchishin, Theory X B) Akiko Animoto, Theory Z C) William Ouchi, Theory Z D) Sam Hyakowa, Theory Y
79) __________ blends Japanese and U.S. management practices into a hybrid approach which calls for long-term employment, collective decision making, and individual responsibility for the outcome of decisions. A) Theory A B) Theory X C) Theory Y D) Theory Z
80)
Theory X managers are likely to believe that A) workers must be controlled in order to achieve a company’s goals. B) most employees know more about their job than the boss. C) employees are motivated mainly by the chance for advancement and recognition. D) most workers seek out more responsibility.
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81)
Theory Y managers would
A) rely on monetary rewards to motivate employees. B) assume that most employees dislike their jobs. C) have confidence in the ability of employees to solve problems that arise during work. D) believe that job enrichment would be an ineffective way to improve motivation because it focuses too much on job content and not enough on working conditions.
82)
What is a characteristic of Type J management? A) lifetime employment B) individual decision making C) rapid evaluation and promotion of employees D) individual responsibility
83)
What is a characteristic of Type A management? A) lifetime employment B) slow evaluation and promotion C) nonspecialized career path D) individual decision making
84) An important criterion that helps to determine the type of management style (Type A, J, or Z) that works best for firms is A) the education level of the workforce. B) the marital and family status of the workforce. C) the general culture of the firm. D) the number of managers vs. the number of employees in the firm.
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85)
William Ouchi's Theory Z embraced which management ideal?
A) Once hired, the employee would be assured of lifetime employment. B) Employees would cooperatively solve problems and decisions would always be consensual. C) Management would cautiously only concern themselves with an employee's work life. D) An employee could be promoted, but both evaluation and promotion would not happen quickly.
86) In analyzing the differences among Theories X, Y, and Z managers, it can be asserted that Theory Z managers A) do not concern themselves with an employee’s personal life. B) understand that workers prefer to work by themselves and will do their best work individually rather than with a team. C) focus on long-term employment. D) don’t include decision making in an employee's responsibilities.
87) Reflecting upon the differences in Type J and Type A work environments, which statement is fundamental to Type J? A) Type J environments fiercely protect the individual rights of workers. B) Type J environments are only concerned about the employee functions at work. C) Type J, unlike Type A, environments believe in more prompt and expeditious promotion for employees. D) Type J, unlike Type A, environments embrace consensual decision making and have a concern for the employee's life at work and outside of work.
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88) William Ouchi believed that a pure Type J approach to management would not work in the United States because it A) failed to encourage open communication. B) could lead to violations of U.S. antitrust laws. C) is based on the values and attitudes of a different culture. D) is too dependent on the assumptions of scientific management.
89) Sam, a manager at a grocery store, believes most of his employees dislike work and would avoid it if possible. He also believes that his employees have little, if any, ambition, and that the only way to motivate them is by using threats and punishment. Sam’s views are consistent with __________ management. A) Theory B B) Theory X C) Theory Y D) Theory Z
90) Carolyn imagines that if she leaves her employees unsupervised for even a few minutes, they will do nothing but slack off. She is known for the harsh criticism and punishment she disburses whenever an employee makes an error. Carolyn is a __________ manager. A) Theory X B) Theory Y C) Theory Z D) Theory J
91) At Freeport Farms Inc., management's expectation for employee creativity is high and employees tend to work with little direct supervision since they are considered trustworthy and committed. The management at Freeport Farms reflects __________ attitudes about employees.
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A) Maslow’s B) Herzberg’s C) Theory X D) Theory Y
92) At the Greener Goods Company, employees are involved in decision making and promised long-term employment. The employees follow a somewhat specialized career path and have individual responsibility for results. In addition, the company provides health and wellness courses for all employees and their families. Greener Goods’ approach is an example of A) Theory R management. B) Theory X management. C) Theory Y management. D) Theory Z management.
93) In Silicon Valley, California, it is not unusual for highly skilled employees to stay at one company for about three years. These specialized employees have a mindset for rapid promotion. They believe that they have only themselves to blame if these high goals are not met. William Ouchi would categorize the management style that these employees operate under as A) Type A. B) Type B. C) Type J. D) Type Z.
94) At Days Past Resale Shop, manager Katrine doesn't waste any time thinking about whether the employees get breaks at reasonable times. In fact, she claims she is hard pressed to determine which one has "worked hard enough" to even deserve a break. Katrine’s managerial style would be classified as
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A) Theory X. B) Theory Y. C) Theory Z. D) Type J.
95) While Genevieve worked frantically at her part-time job at Fashion Zone preparing for the regional manager's visit in a few days, her department manager, told her: "Don't worry Genevieve, when I first started, I made $9.25 an hour too. It gets better!" Genevieve knew that her pay was the last thing that motivated her to do her work, she would prefer more freedom to be creative with the product displays. Genevieve would prefer to work with a __________ manager. A) Theory X B) Theory Y C) Type J D) Type A
96) __________ is based on the notion that setting ambitious but attainable goals will improve motivation and performance if the goals are accepted, accompanied by feedback, and facilitated by organizational conditions. A) Theory J B) Goal-setting theory C) Scientific management D) The principle of performance feedback
97)
Management by objectives was developed by
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A) Abraham Maslow. B) Henry Gantt. C) Frank and Lillian Gilbreth. D) Peter Drucker.
98)
The purpose of management by objectives is to
A) enable top management to set goals for the entire organization. B) simplify the jobs of middle management by providing them with predetermined goals and objectives. C) help employees motivate themselves with a goal-setting model that involves discussion, review, and evaluation by management and employees. D) allow employees to set their own goals without consulting with management.
99) __________ is a system of goal setting and implementation that involves a cycle of discussion, review, and evaluation of objectives among top and middle managers, supervisors, and employees. A) Extrinsic reward B) Management by objectives C) The three-step planning system D) Hierarchy of needs
100)
Management by objectives is most effective in organizations that A) are relatively stable. B) are faced with rapidly changing conditions. C) rely heavily on the principles of scientific management. D) are subject to extensive government regulation.
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101) In the work environment, __________ means to work with an employee, doing part of the work if necessary. A) coaching B) guiding C) helping D) teaching
102) Within the context of work, __________ means acting as a resource to an employee by teaching, guiding, and making recommendations, without actively doing any of the employee’s work. A) coaching B) augmenting C) helping D) facilitating
103) According to __________, the amount of effort employees devote to a task depends on their expectations of the outcome. A) scientific management theory B) Theory J C) Theory Z D) expectancy theory
104) According to Victor Vroom, which question is an employee likely to ask before deciding to exert his or her maximum effort toward completing a task?
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A) Is the reward for completing the task worth the effort involved? B) Are other employees working on the same type of task? C) Is this task more difficult than my previous work? D) How often will I be expected to do this task?
105) Researchers David Nadler and Edward Lawler suggest that in order to use expectancy theory to improve worker motivation, the first thing managers should do is A) identify the critical path for the project. B) determine what rewards are valued by employees. C) ensure that the rewards are tied to the employee's performance. D) decide on a way to monitor employee performance.
106) According to expectancy theory, the amount of effort employees exert on a specific task depends on their A) expectations of the outcome. B) manager's level of cooperation. C) perception of the importance of the task. D) level of needs that are not yet satisfied.
107)
Equity theory states that employees will perform well if they
A) understand the nature of their responsibilities. B) have an opportunity to impress others in the organization. C) believe the reward they receive fairly compensates them for their efforts when compared to others in similar positions. D) know that their supervisor has set reasonable performance goals and communicated them clearly.
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108)
According to equity theory, what are employees most likely to ask? A) How hard is the task? B) If I accomplish the task, what's my reward? C) If I do a good job, will it be worth it? D) Is my boss too autocratic?
109)
The basic principle of equity theory is that employees try to A) maintain equity between inputs and outputs compared to people in similar positions. B) ensure that performance standards are fair and attainable. C) earn as much as possible with as little work as possible. D) achieve the mutually agreed upon goals of management and employees.
110)
If an employee believes there is inequity in the workplace, it is likely to result in A) motivation to work harder. B) higher morale. C) lower productivity and reduced quality. D) greater worker empowerment.
111)
Equity judgments are based on A) quantifiable evidence. B) deductive reasoning. C) statistical extrapolation. D) people's perceptions.
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112) A problem with equity judgments is that employees often __________ their own contributions to the success of a business. A) overestimate B) refuse to consider C) do not care about D) are unaware of
113) According to goal-setting theory, in order for goals to enhance motivation and performance they must be A) recognized by monetary rewards. B) accompanied by feedback. C) tied directly to the principles of scientific management. D) put into the labor contract.
114) According to the principle of management by objectives, who is responsible for motivating employees? A) top management B) an outside consultant C) human resources D) the employees themselves
115) One of the reasons management by objectives is an effective way to implement the ideas of goal-setting theory is that it A) makes it easier for managers to explain the reason for the goals they set for their employees. B) turns managers into helpers rather than coaches. C) allows employees to set their own goals without the need to consult with managers. D) provides a method to get everyone involved in the process of setting goals.
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116)
Which statement would a proponent of management by objectives likely make?
A) Top management is best qualified to set the organization's overall goals. B) When all is said and done, employees must motivate themselves. C) Most employees are motivated more by pay than by recognition. D) In order to achieve important goals, managers must rely more on helping employees rather than coaching them.
117) Which theory would be most closely tied to the idea that employee motivation requires that the rewards for completing a task are sufficient to justify the effort? A) Theory Z B) Theory X C) equity theory D) expectancy theory
118) Expectancy theory suggests that managers attempting to improve employee performance would be well advised to A) make sure that all employees are expected to meet the same standards. B) focus on setting monetary rewards for meeting the standards. C) set attainable performance goals. D) keep salaries earned by employees confidential.
119)
According to equity theory, which statement is most accurate?
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A) The best way to motivate employees is to offer everyone the same reward. B) Employees' perceptions of fairness will affect their level of motivation. C) Employees generally do a good job of estimating their contributions to a firm. D) In the United States, employees tend to focus on their own situation and pay little attention to the efforts and rewards of other employees.
120)
The best remedy for staving off perceptions of inequity in the workplace is A) keeping employees' pay rates as a guarded secret between HR and the supervisor. B) hiring more employees than you believe the work situation requires. C) advocating frequent and open communication among all employees and managers. D) reminding employees regularly that they are very fortunate to have jobs.
121) Which situation would indicate that a manager failed to apply the basic concepts of expectancy theory? A) Employees are frustrated because they have no say in their organization's goals and objectives. B) Some of the organization's employees reduce their effort because their working conditions change. C) Employees are unwilling to work toward achieving an important goal because they believe the reward offered is not sufficient to justify the effort. D) Employees are confused and frustrated because managers do not provide them with adequate feedback about their job performance.
122) Marietta is a sales representative for the Fresh Taste Yogurt Company. She is about to meet with her manager to review her progress toward meeting the sales objectives they agreed to at the beginning of the year. Marietta likes the fact that managers at Fresh Taste listen to their employees’ ideas and get everyone involved in setting goals and objectives. Marietta’s experience suggests that Fresh Taste is utilizing
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A) scientific management. B) management by objectives (MBO). C) the program evaluation and review technique (PERT). D) programmed management.
123) Akansha is a credit department manager for Green and Lean Auto Group. Jackson is a new employee and Akansha has been offering him advice, encouragement, and instructions. However, she is careful to let Jackson do the actual work, even if he struggles a bit. Akansha’s approach indicates that she is A) both coaching and helping Jackson. B) helping Jackson rather than coaching him. C) familiar with the leading principles of scientific management. D) coaching Jackson rather than helping him.
124) Grace uses management by objectives in her office. Today, she is working with Reggie to teach him the key parts of a new software program that he can use in his work. She lets Reggie guide the teaching session and only jumps in when he has a question. What action is Grace using as she works with Reggie? A) helping B) mentoring C) coaching D) controlling
125) Theo Morrison is the offensive line coach for a university football team. He has set challenging fitness standards for the summer that the linemen should have no problem achieving if they work hard. He knows his players hate running wind sprints so to encourage them to work out during the summer he announced that any player who passes the fitness test at the beginning of fall practice will be allowed to skip sprints for the first two weeks of practice. Coach Morrison’s approach to motivation is consistent with
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A) expectancy theory. B) assessment theory. C) scientific management. D) the autonomous feedback principle.
126) Allyson is in charge of a nursing shift at a senior care facility. She wants to improve the motivation and performance level of the nurses under her direction. According to expectancy theory, one element of an effective motivational strategy is to A) simplify the job. B) determine what types of rewards are valued by the nurses. C) create the ideal working environment in terms of lighting and comfort. D) rotate the nurses so that they perform different jobs each day.
127) Joss, an employee for a sports marketing firm, feels he has been treated unfairly by the organization. He helped three other employees organize a series of successful SmashBall tournaments all around the country. While the other employees were given a bonus and corporate recognition, his efforts were ignored. According to equity theory, Joss is likely to respond by A) ignoring the perceived inequity. B) reaching the conclusion that his treatment is not related to the treatment of others. C) reducing his efforts on future projects. D) threatening the boss.
128) Trisha manages a sales force that sells laboratory supplies to university science labs. She wants to implement a reward program for high performance based on the principles of expectancy theory. Any rep whose territory bills over $500,000 in sales will win a trip for two to a Caribbean island. Last year the high billing territory made $400,000 in sales. As the outside consultant on the rewards program project, you suggest that she ask around to make certain that this is something the reps would enjoy. Your other advice is
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A) to make certain the payout threshold is sufficiently high so that very few reps will be able to reach the sales goal. B) if after several months into the sales contest it appears that several reps are over halfway to meeting this goal, there may be a need to increase the payout threshold. C) that monetary rewards are never motivators. D) to consider whether the sales reps believe that this reward is attainable.
129) Annette, the marketing director for Best Racquet Tennis Group, is making plans for the annual tournament and is trying to determine the prize money. In past years, the group successfully raised $25,000 through registration fees and sponsorship. This year, Annette’s general manager wants to attract some great local talent and announce the top prize at $10,000. Annette thinks the resort cannot afford to announce a $10,000 top prize at the expense of losing out on a portion of the fees of less talented players who may decide not to register. She explains to the general manager that if they set the prize too high, several better-than-average players in the area will feel "out of their league" when the top players join in. Annette’s analysis of the situation is reasonable according to A) goal-setting theory. B) equity theory. C) expectancy theory. D) reinforcement theory.
130) Herzberg's research indicated that employees are motivated by job content. Modern managers focus on __________ by increasing the significance of the job, and even providing the employee with important feedback. A) rotating the job B) enriching the job C) simplifying the job D) reducing the responsibilities in the job
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131)
Managers who advocate job enrichment focus on creating jobs with A) repetitive motions. B) simplified tasks. C) very specialized and difficult tasks. D) skill variety and autonomy.
132) __________ emphasizes motivating the worker through the characteristics of the job itself. A) Automation B) Job engineering C) Scientific management D) Job enrichment
133) __________ is the characteristic of work concerned with the degree of freedom, independence and discretion an employee has in scheduling work and determining procedures. A) Autonomy B) Interdependence C) Feedback D) Task significance
134) The characteristic of work that is concerned with the amount of direct and clear information employees receive about their performance is called A) linkage. B) feedback. C) autonomy. D) enlargement.
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135) The degree to which a job has a substantial impact on the lives or work of others in the organization is referred to as A) task significance. B) task redundancy. C) the multiplier effect. D) mutual interdependence.
136) __________ is the degree to which a job requires doing a task with a visible outcome from beginning to end. A) Task significance B) Job rotation C) Job specification D) Task identity
137) The practice of moving employees from one job to another to make work more interesting is called A) task mobility. B) job rotation. C) job incrementation. D) job enlargement.
138) __________ attempts to increase task efficiency by breaking down jobs into simple steps and assigning people to each of those steps.
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A) Job simplification B) Job segmentation C) Task restriction D) Goal setting
139) Job __________ combines a series of tasks into one assignment that is more challenging, interesting, and motivating. A) optimization B) enhancement C) enlargement D) rotation
140)
The first step toward establishing open communication within an organization is to A) create a clear chain of command much like the one found in military organizations. B) set up a computer network. C) place suggestion boxes in every department. D) create an organizational culture that rewards listening.
141) As companies restructure to create greater efficiencies in their operations, there is a greater opportunity for __________ where management combines specialized tasks in one job, asking employees to broaden their scope of responsibilities. A) job enlargement B) job simplification C) job specialization D) job confrontation
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142) In terms of employees communicating with management, one way employees can be motivated on the job is if A) they're provided closed-end surveys for feedback on a monthly basis. B) they're given daily, company-wide passive emails. C) a respectful rank and file plan is implemented, where middle and higher-level managers are addressed as "Mr.," "Ms.," or "Dr." D) there are procedures for encouraging open communication.
143)
Employees will perceive that their opinions are more valued if
A) they're given personalized, closed-end question-type employee opinion surveys. B) they're provided settings where employees have the opportunity to converse with all levels of management. C) they're given emails from the CEO on a regular basis. D) the company emphasizes job simplification.
144)
The major benefit of open communication in a company setting is A) a more directed flow of information. B) motivated employees. C) it acts as a catalyst for self-actualization. D) the direct link to job rotation.
145)
Which practice would fail to result in more open communication?
A) provide opportunities such as company picnics and open lunchrooms that promote active communication among employees and management B) develop opportunities for employees to offer open-ended responses to internal surveys C) using a passive voice when managers communicate with employees D) provide training for improving listening skills
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146)
Which practice would be most consistent with the views of scientific management? A) job enlargement B) job simplification C) job enrichment D) job rotation
147) Alex, an employee at Peterson Dental Instruments, recently had his job redefined. He now has more flexibility in the hours he works and more say in the procedures used on the job. This suggests that Peterson Dental Instruments is trying to change Alex’s job so that it has more A) feedback. B) autonomy. C) task identity. D) task significance.
148) In the past, Morgan’s only chance to learn how she was doing on the job came during performance reviews with her boss twice a year. Her company recently implemented a policy designed to give her and other employees detailed information about their job performance on a monthly basis. This suggests that the company now provides Morgan and her co-workers with more A) autonomy. B) task identity. C) task significance. D) feedback.
149) Christian is assigned a different job at Top Farm Dairy every month. He enjoys the task variety and finds that switching jobs on a regular basis keeps the work from becoming boring. The dairy is using a technique known as job
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A) enlargement. B) sharing. C) simplification. D) rotation.
150) At Hybrid Group Vehicles, employees are grouped into teams. Each team is responsible for assembling an entire automobile. The company gives each team freedom and flexibility to decide how to divide up the work and keeps the employees informed about how their cars are selling. Hybrid Group Vehicles is using a strategy of A) job enrichment. B) job simplification. C) self-actualization. D) therblig.
151) Until recently, QuickStart Electronics manufactured computer cameras and speakers on an assembly line with each worker performing only one simple task. Three months ago, the company began allowing individual employees to assemble entire systems, test the components, and even install the software that QuickStart includes with its equipment. QuickStart Electronics’ new production method is an example of A) job enlargement. B) roundabout production. C) job rotation. D) flexible manufacturing.
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152) At one of the new Technology First College campuses, administrative staff members are trained on a number of jobs including general student registration procedures, advising, counseling, computer support, and faculty assistance. Although Gwen usually registers students and Kevin usually advises students, they have been trained in each other’s jobs and can easily switch roles and help each other out during busy times. This campus has successfully implemented A) job simplification. B) job rotation. C) job enlargement. D) a self-managed team.
153) Bryan works in a lab that is very large with at least 15 research faculty like himself and 25 graduate students whose benches are all together on one side of the laboratory. Mallory works in a lab that is similar in size, but graduate student benches are interspersed with faculty. Bryan is referred to as Dr. Wilson by the graduate students. Mallory and the graduate students in her lab are on first-name basis. In terms of communication in the workplace, which statement would you consider good advice to the managers of these labs? A) Graduate students will easily lose respect for other faculty if they are not encouraged to use the title "Dr." when referring to the researchers who have attained the Ph.D. degree. B) There is a lot of sensitive information and highly classified techniques in the research process that should not be communicated with graduate students. C) Job enrichment is an important part of the learning process, and it will only happen if students receive feedback communication on a monthly basis. D) Open communication occurs when barriers such as work titles and ranks are eliminated, and workspaces are conducive to learning.
154) Ken, the CEO of Macro Corp.—a technology provider with 17,000 employees—answers his own phone and takes calls from employees of all levels. He actually loves to hear about what employees think the company is doing right and what they could be doing better. Ken is motivating his employees by
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A) creating an organizational culture that rewards listening. B) rewarding employees with cash bonuses for good ideas. C) giving high performers separate perks they value. D) bolstering employee fairness.
155)
Managers need to remember that motivational formulas should be A) tailored to the individual. B) tailored to the team of employees. C) developed by using one theory at a time. D) uniform among all members of a department.
156)
What is a characteristic of a high-context culture?
A) Workers get right to the task, without the need to socialize during the first 30 minutes at work. B) Workers get right to the task, after they ease into the workday. C) Relationship building is considered a waste of time. D) Relationship building and group trust are considered very important and occur before performing business tasks.
157)
What is a characteristic of a low-context culture? A) Workers get right to the task, without the need to socialize during the first ½ hour of
work. B) Workers get right to the task, after they take care of their social needs. C) Relationship building is considered a waste of time. D) Relationship building is considered very important and occurs before performing business tasks.
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158)
Generation X employees are likely to A) be more concerned with career security than with job security. B) be less willing to move and change jobs. C) lack the drive and ambition of earlier generations. D) be poor at providing feedback to others.
159)
A strength of Generation X managers is likely to be their
A) loyalty to the firm. B) individualistic approach to problem solving. C) ability to provide feedback to employees. D) willingness to sacrifice other aspects of their lives to achieve success in the workplace.
160)
The generation born between 1980 and 1995 is known as A) Generation X. B) Generation J. C) Generation Y. D) Generation Z.
161)
As a group, Millennials tend to be A) older and more mature than Gen Xers. B) less interested in technology than Baby Boomers. C) inefficient, easily bored, and uncommitted. D) adaptable, tolerant, and tech-savvy.
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162)
Even across generations, employee motivation is likely to A) remain a mystery because researchers cannot quite pinpoint where it comes from. B) come from the job itself. C) develop within employees over time. D) diminish among employees who achieve at high levels.
163)
Baby Boomers as managers need to understand that
A) Gen X and Gen Y employees will be motivated by flexibility in the workplace. B) Gen X and Gen Y employees will be motivated by a good deal of structure in the workplace. C) Millennials are motivated from within, while Gen Xers need rewards. D) Gen Xers are motivated by knowing that they can keep their jobs for a lifetime.
164)
When reflecting upon the newer generation, each older generation says the same thing: A) their generation had it better. B) the newer generation "breaks the rules." C) their generation had a more difficult time of it. D) newer generations are smarter.
165) In order to understand how to motivate the various generations, we need to understand each generation's preferred mode of communication. Look at the following chart and fill in the blank cell. Generation Traditionalists Baby Boomers
Preferred Communication Style at Work Face to face
Gen Xers
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Millennials
Technology such as social media
A) by cell phone B) by text C) meetings and conference calls D) online and social media
166)
Which statement about cultural differences in the workplace is most accurate?
A) The best way to deal with cultural differences in the workplace is to treat everyone the same way. B) Cultural differences were once a major problem, but television, telecommunications, e-mail, and the Internet have brought people closer together and greatly reduced cultural differences. C) Managers must be very aware of cultural differences and recognize that different employees may respond best to different management and motivational styles. D) Only firms that hire a lot of foreign-born employees are likely to have problems dealing with cultural differences.
167) When it comes to motivating Millennials and Gen Xers, it is important for managers to know that they have a few things in common. One important likeness is A) they anticipate stability in the workplace. B) they expect change. C) neither group was raised by Baby Boomers. D) neither group has advanced to management positions.
168) "Fun and stimulation" are rated as important job criteria by Millennials; what might be a way to motivate this generation?
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A) Simplify jobs so that they don’t have to focus on tasks. B) Simplify jobs so that they do not have to work longer than six-hour days. C) Provide opportunity for innovation and job rotation. D) Separate the workspaces of Millennials from Gen X and Baby Boomers.
169) Which statement about high-context cultures reflects how managers in this type of culture might operate? A) Your personal life would not be of concern to a manager that operates in a highcontext culture. B) If you are selling your company's product to another business that has a high-context culture, it is almost guaranteed that the product or service will sell itself. C) As a manager in a high-context culture, you will always stress that employees compartmentalize their work life and home life, so that each does not interfere with the other. D) As a sales professional trying to sell your product to a business that operates within a high-context culture, you may have to visit the decision makers several times and get to know them on a personal level.
170) Which description appropriately reflects the way that Gen Xers prefer to communicate at work? A) face to face B) in small group meetings C) through e-mail D) through conference calls
171) According to the box "Give Your Co-workers a Shout Out!," which generation has changed communication in the modern workplace with their need for public recognition?
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A) Baby Boomers B) Generation Alpha C) Generation X D) Millennials
172) A college graduate with a degree in sociology, Mati is in no hurry to find a job. In fact, she has elected to continue her education until she decides on the type of career she would like to pursue. She is somewhat skeptical of finding the ideal job that provides meaningful work but gives her plenty of freedom for the things she enjoys such as golf, skating, and cooking. Mati is typical of A) Baby Boomers. B) Gen X. C) Gen Y. D) Gen Z.
173) MacKenzie, an employee at M-Tech Fitness, is pleased that her old supervisor retired because he rarely told MacKenzie if her work was acceptable until something went wrong. The new supervisor starts each day with reviewing yesterday's successes and challenges and gives everyone opportunity to voice their concerns. One of the best assets of __________ managers is their ability to provide timely feedback and to understand that employees want regular performance reviews. A) Baby boomers B) Gen X C) Gen Y D) Gen Z
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174) Connor’s goal to sell his company's state-of-the-art diabetes pump to several foreign firms certainly could have gone better. Although none of the companies he visited turned him down, only one agreed to place an order. Representatives from one Indonesian firm and two Chinese firms asked him to come back again so they could get to know him better! This made Connor wonder, "Didn't they realize the expense of these international trips?" He is experiencing A) McGregor’s Theory X. B) the fact that he is from a highly developed culture and the prospective buyers are from third-world countries. C) the differences between high-context and low-context cultures. D) the physiological level of Maslow’s hierarchy.
175) The first meeting between the new CEO of Game Guys Inc., John Noble, and Howie Spradlin, the production manager, did not go smoothly. The purpose of the meeting was to discuss the problem of declining productivity and to develop a strategy to turn the situation around. Howie started the conversation by handing Mr. Noble the most recent production report. "I've always thought that most of our employees were lazy, and now I've got proof," Howie stated. "We pay these guys the highest wages in the industry, provide them with a safe place to work, and make the job as simple as possible. We aren't asking these guys to do brain surgery, but productivity still lags and our production costs increase. I've told all the supervisors to watch these lazy bums every second to make sure they put in a full day's work. If those guys think I'm going to let them get away with goofing off, they're in for a rude awakening." CEO Noble responded in a way that surprised Howie. "Maybe these employees aren't lazy, Howie, maybe they are just bored and resent the way we've treated them," he said. "The employees are experienced and well trained. They might work harder and smarter if the work were more interesting and rewarding. Their attitudes might even improve if we treated them with more respect. Maybe one of the best ways for you and me to understand where they're coming from is to spend some time alongside them." For the next hour, the two discussed ways to improve worker motivation and performance. Howie left the meeting with an unsettled feeling. Many of Mr. Noble's suggestions seemed naïve to Howie. "Mr. Noble is the boss, but I think he is too optimistic regarding human nature," Howie mused. Reluctantly, Howie had to admit that his own approach had not succeeded in improving the plant's performance. He decided to take a hard look at some of Mr. Noble's ideas.
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175.1) According to McGregor, Howie's views of his employees suggest he is a __________ manager. A) Theory A B) Theory J C) Theory X D) Theory Y
175.2) Currently, jobs at Game Guys are broken into small individual steps, and each employee is assigned to perform a different step in an effort to achieve task efficiency. This technique is known as job A) segmentation. B) rotation. C) enlargement. D) simplification.
175.3) John Noble speculated that Howie really didn't know much about his employees, including the types of rewards that they found meaningful and whether they personally felt that if they worked hard, they could achieve a reward. Noble's thoughts referred to A) reinforcement theory. B) equity theory. C) expectancy theory. D) Theory J.
175.4) Before ending the meeting, John Noble informed Howie that he would be sending out an e-mail to all employees asking for suggestions as to how the jobs could be restructured to improve productivity. As Howie walked back to the production site, he shook his head, "Is Noble from a different planet? Does he really think our workers have a clue?" Unlike Noble, Howie does not realize that
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A) employees can be motivated by open communication. B) employees seek equity. C) employee perceptions of equity are usually under-estimations. D) employees will offer ways to simplify job tasks.
176) The sense of satisfaction you get when you achieve an important goal is an intrinsic reward. ⊚ true ⊚ false
177)
Extrinsic rewards are those that are given to a person by someone else. ⊚ true ⊚ false
178) Since motivation comes from within an individual, there is little that managers can do to help motivate employees. ⊚ true ⊚ false
179) When unhappy employees leave a company, the firm normally ends up benefiting financially. ⊚ true ⊚ false
180) Frederick Taylor's goal was to find ways to improve worker motivation by making work more interesting and challenging. ⊚ true ⊚ false
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181) A key element of Frederick Taylor's approach was the time-motion study, which examined the tasks performed to complete a job and the time needed to complete each task. ⊚ true ⊚ false
182) Frederick Taylor based his approach on the belief that each worker was an individual who should be treated as a unique asset to the firm. ⊚ true ⊚ false
183) Scientific management became the dominant strategy for improving productivity during the early 1900s. ⊚ true ⊚ false
184)
Elton Mayo became known as the father of scientific management. ⊚ true ⊚ false
185) Frederick Taylor believed that employees would be more productive if they were allowed to decide for themselves which methods to use at work. ⊚ true ⊚ false
186)
Three elements were basic to Taylor's approach: time, methods, and rules of work. ⊚ true ⊚ false
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187) Frank and Lillian Gilbreth developed the principle of motion economy, which said that every job could be broken down into a series of elementary motions. ⊚ true ⊚ false
188) Frederick Taylor's ideas about improving worker productivity attracted a lot of attention at the time but had little lasting significance. ⊚ true ⊚ false
189) The concept of engagement is used to describe the level of passion and motivation that a person has about their work. ⊚ true ⊚ false
190) Frederick Taylor encouraged managers to make use of psychological techniques to improve worker motivation. ⊚ true ⊚ false
191) Frederick Taylor believed that workers existed to make management's job easier and more efficient. He believed that workers were interested in one thing: good pay. If a business provided good pay, workers would provide the grueling labor necessary to get the job done. ⊚ true ⊚ false
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192) Carla works in the kitchen at a large hotel and earns a good salary. Her current supervisor, Trent, stands next to her while he tells her exactly how to roll out the bread dough and ice cakes. It's as if she never learned these basic skills in culinary school! Just this morning, he barked loudly from the other side of the room, "You should be able to ice five cupcakes in a minute! Time yourself!" Frederick Taylor would have approved of Trent’s philosophy. ⊚ true ⊚ false
193) Kyle successfully finished a challenging assignment given to him by his supervisor. This feeling of accomplishment and satisfaction Kyle experienced is an example of an extrinsic reward. ⊚ true ⊚ false
194) Simply Salad Food Kitchen shows all of its employees its own specific methods for creating each type of salad it sells. The methods are designed to ensure a beautiful finished salad with a minimum of time and effort. All employees are expected to follow these methods precisely. Simply Salad’s approach to making the salads is consistent with the ideas of scientific management. ⊚ true ⊚ false
195) Geoff, a supervisor at an advertising company, has seen that most of his employees are more productive if he lets them have some freedom and flexibility in how they go about their work. Geoff’s experience is consistent with the teachings of scientific management. ⊚ true ⊚ false
196) One of the original objectives of the Hawthorne studies was to determine the degree of lighting needed in the workplace to enable employees to achieve optimum productivity. ⊚ true ⊚ false
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197) The original results of the Hawthorne studies proved that employees were much more productive when they worked in well-lit areas than when they worked in poorly lit areas. ⊚ true ⊚ false
198) A major conclusion of the Hawthorne studies was that the best way to motivate employees is with monetary incentives such as pay raises and bonuses. ⊚ true ⊚ false
199) The Hawthorne effect is evident in the assembly line configuration many manufacturers use today. ⊚ true ⊚ false
200) The results of the Hawthorne studies encouraged researchers to begin studying human motivation and managerial styles that lead to higher productivity. ⊚ true ⊚ false
201) Elton Mayo's researchers concluded that worker motivation improved when managers listened to worker's ideas and suggestions. ⊚ true ⊚ false
202) The Hawthorne studies proved that the methods of scientific management were the best way to achieve maximum productivity among employees.
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⊚ ⊚
true false
203) The Hawthorne studies concluded that higher pay is an effective motivator for employees. ⊚ true ⊚ false
204) The Hawthorne studies established that productivity at work seldom changed, but an employee's attitude could show significant improvement if they were given the opportunity to think critically at work. ⊚ true ⊚ false
205) In his conclusions, researcher Elton Mayo failed to factor in employee’s feelings and attitudes regarding their work. ⊚ true ⊚ false
206) Brad, the manager at the local park district, wants to figure out how to improve worker motivation. Recently, Brad read about the Hawthorne studies. He believes these studies offer important insights into what motivates employees. Brad is likely to support the methods and ideas associated with scientific management. ⊚ true ⊚ false
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207) Cassie is conducting an experiment with her employees. She wants to see how temperatures affect the productivity of the team. Cassie just completed the first phase of her experiment, in which a group of employees perform job-related tasks in a special area where the temperature was 10 degrees cooler than on the factory floor. No matter the temperature, employees in the experimental group consistently outperformed employees in the factory. The Hawthorne effect suggests that the most likely reason for this improvement in performance is that the cooler working conditions allowed the employees in the experiment to work harder without getting tired. ⊚ true ⊚ false
208) Having just finished a book on worker motivation, Jamal, a small business owner, looks for a way to increase the productivity of his employees. He found the book's discussion of the Hawthorne studies particularly relevant. Based on his reading, Jamal is likely to view pay increases as the best way to improve employee motivation. ⊚ true ⊚ false
209) Marietta works for a large dental supply company. Last week she visited with an advisor at the nearby university because her employer encourages workers to continue their education. The company even gives employees time off to go to academic-related appointments during regularly scheduled work hours. One would assume that management at Marietta’s company values the results of the Hawthorne studies, more so than traditional scientific management principles. ⊚ true ⊚ false
210)
Abraham Maslow believed that motivation arises from the desire to satisfy unmet needs. ⊚ true ⊚ false
211)
According to Maslow, it is impossible to rank human needs in any logical order.
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⊚ ⊚
true false
212) According to Maslow, people will try to satisfy lower-order needs before they turn their attention to higher-order needs. ⊚ true ⊚ false
213)
Safety needs are placed at the lowest level in Maslow's hierarchy of needs. ⊚ true ⊚ false
214) Maslow referred to the needs people had for recognition and acknowledgment from others as social needs. ⊚ true ⊚ false
215)
According to Maslow, a satisfied need is no longer a motivator. ⊚ true ⊚ false
216) In Maslow's hierarchy, self-actualization needs are associated with basic survival, such as the need for food and shelter. ⊚ true ⊚ false
217)
In Maslow's view, social needs include the need to feel loved and accepted.
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⊚ ⊚
true false
218) Maslow believed that lower-level needs may emerge at any time when they are not met and take our attention away from higher-level needs. ⊚ true ⊚ false
219) One thing that U.S. firms should do in order to compete successfully is to provide an atmosphere of dependability and reliability for all levels of employees. By doing so, Maslow would say that these firms are satisfying the physiological needs of all employees. ⊚ true ⊚ false
220) According to Maslow, if you have a self-esteem problem, you probably will not be able to concern yourself with developing to your fullest potential. ⊚ true ⊚ false
221) Often, we hear that teenagers have unmet social needs. According to Maslow, their desire to become socially accepted will consume them, at the expense of reaching for higher goals, such as developing to their fullest potential. ⊚ true ⊚ false
222) Chris is a talented violinist and has won a number of awards. However, he still practices at least two hours a day to reach his highest potential. Chris is motivated by self-actualization needs. ⊚ true ⊚ false
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223) Candace just took a job with higher pay and better job security. She now lives in a nicer apartment and maintains a fairly comfortable lifestyle. However, she is still new at the company and feels like an outsider. She does not feel as though her fellow employees have accepted her into their group yet. According to Maslow's theory, Candace is driven by a desire to satisfy her social needs. ⊚ true ⊚ false
224) Lately, Stefan is frustrated at work because he feels he isn't recognized for his on-the-job accomplishments. He earns a decent salary and is on friendly terms with the other employees in his department. According to Maslow's hierarchy of needs theory, Stefan is having difficulty satisfying his esteem needs. ⊚ true ⊚ false
225) The late famous broadcast journalist Walter Cronkite said that one of his regrets in life was not actively participating in the space program as an astronaut. Back in the 1980s, he was selected as a candidate to be the first journalist to fly into space, but NASA decided to take a teacher instead. In some ways, this may appear as though Cronkite was pursuing a self-esteem need; however, having already achieved celebrity status, for Cronkite, this was the pursuit of a self-actualization need. ⊚ true ⊚ false
226) Herzberg's research focused on determining which management style achieved the highest level of worker motivation. ⊚ true ⊚ false
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227) Herzberg's research examined how conditions related to the job itself affected the motivation of employees. ⊚ true ⊚ false
228) Herzberg's study showed that job security was the job characteristic that ranked highest as a motivator. ⊚ true ⊚ false
229) Herzberg found that the factors associated with job environment ranked the highest as employee motivators. ⊚ true ⊚ false
230) Herzberg found that the sense of achievement employees experienced when they performed their jobs was an important motivator. ⊚ true ⊚ false
231) Herzberg used the term hygiene factor to refer to an element of job content that was most important as a source of worker motivation. ⊚ true ⊚ false
232) According to Herzberg, when a hygiene factor is not fulfilled, employees could become dissatisfied. ⊚ true ⊚ false
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233) Herzberg's research found that improvements in the work environment were a more effective way to motivate employees than improvements in job content. ⊚ true ⊚ false
234) Maslow identified and categorized basic needs that most persons would like to satisfy, while Herzberg's research identified motivators and hygiene factors that inspire employees to fulfill their needs. ⊚ true ⊚ false
235) Herzberg's research identified the key factors that motivate workers, including company policies and administration, wage rates, interpersonal relations with co-workers, and physical environment at work. ⊚ true ⊚ false
236) Herzberg's findings suggest that the best way for firms to increase worker motivation is to focus on improving pay and making working conditions more pleasant. ⊚ true ⊚ false
237) Herzberg’s findings show that hygiene factors do not motivate workers toward high achievement at work, so managers can safely ignore these factors when trying to develop an effective work environment. ⊚ true ⊚ false
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238) Herzberg's findings suggest that Yard Card, a small outdoor yard sign company, can help its workers satisfy higher-order needs by identifying those things that motivate (inspire) them to work at their fullest potential. ⊚ true ⊚ false
239) Douglas McGregor observed that all managers tend to share the same common assumptions about employees. ⊚ true ⊚ false
240) According to McGregor, Theory X managers assume that employees dislike work, and will avoid it if possible. ⊚ true ⊚ false
241) According to McGregor, Theory X managers motivate employees by giving them a great deal of freedom and responsibility. ⊚ true ⊚ false
242) Managers who make Theory X assumptions about employees tend to watch their employees very closely to learn how they make decisions and then gently guide employees based on that input. ⊚ true ⊚ false
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243)
Theory X management has essentially disappeared from the real-world workplace. ⊚ true ⊚ false
244) Theory Y managers assume that most people are capable of using a relatively high degree of imagination and creativity to solve problems. ⊚ true ⊚ false
245) Theory Y managers assume that the main factor that motivates most employees is the desire to earn more money. ⊚ true ⊚ false
246)
Theory Y managers are less likely to use empowerment to motivate employees. ⊚ true ⊚ false
247) Theory Y managers adhere to the principle that typically a person’s intellectual potential is not fully realized. ⊚ true ⊚ false
248) According to William Ouchi, two of the main features of the Japanese approach to management are individual decision making and rapid promotions. ⊚ true ⊚ false
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249)
William Ouchi concluded that culture should not be a factor in one's management style. ⊚ true ⊚ false
250)
Ouchi's Theory Z is a blend of Type A and Type J business cultures. ⊚ true ⊚ false
251) Theory Z calls for the creation of a sense of participation and cooperation within an organization. ⊚ true ⊚ false
252) Theory Z emphasizes reliance on individual creativity and initiative rather than collective decision making. ⊚ true ⊚ false
253) Recent economic developments, as well as demographic and social changes in Japan, have led some Japanese firms to seek new approaches to management. ⊚ true ⊚ false
254) In the view of William Ouchi, managers of U.S. firms would have a smooth transition when implementing the management styles employed by Type J managers. ⊚ true ⊚ false
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255) According to Ouchi, the best way for U.S. firms to become more competitive is to adopt the Type J approach to management. ⊚ true ⊚ false
256) The goal of William Ouchi was to develop a modified business culture that blends the best of Type J firms with the best of Type A firms. ⊚ true ⊚ false
257) Henri tells his employees at Precise Watch Group exactly what to do, how to do it, and when. He believes that most of his employees are lazy and will go straight to their phones if he doesn't keep an eye on them. When he finds an employee who is not performing up to his or her expectations, Henri threatens to dock their pay to increase the worker's motivation. Henri is a Theory X manager. ⊚ true ⊚ false
258) Micah has a great deal of faith in the abilities of his team. He thinks most employees want to be productive and will work hard if given the right incentives. He also believes that most firms do not take full advantage of the intelligence and creativity of their employees. Because of this, Micah favors a managerial style that allows employees to be flexible and creative in how they do their jobs and empowers them to make and implement decisions. Micah is a Theory X manager. ⊚ true ⊚ false
259) Trina is creative and intelligent. She prefers to work on her own and on challenging projects. Trina would be most effective when working for a Theory X manager. ⊚ true ⊚ false
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260) Seth is very talented and ambitious. He likes to work independently and wants to move up in his company as quickly as possible. Seth might become frustrated if he worked in a firm that took a Theory Z approach to management. ⊚ true ⊚ false
261) Marlo wants to work with others to solve problems and make decisions. But she is also able to assume individual responsibility. She prefers working for a company that takes a holistic view of its employees. These preferences suggest that Marlo might enjoy working at a company that uses a Theory Z approach to management. ⊚ true ⊚ false
262) After a 3-year probationary period, career positions at Truman Community College are fairly secure, even though the opportunity for promotion runs pretty slowly. These jobs would probably appeal to people who currently work for Type A companies. ⊚ true ⊚ false
263) Peter Drucker made an important distinction when he stated that managers do not motivate employees, but employees motivate themselves. ⊚ true ⊚ false
264) Management by objectives (MBO) is a goal-setting theory model that sets goals by getting all employees active in the goal formulation process, committing employees to meeting the goals, and then monitoring performance. ⊚ true ⊚ false
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265) The central idea behind management by objectives (MBO) is that employees motivate themselves through the process toward goal achievement. ⊚ true ⊚ false
266) The management by objectives model devised by Peter Drucker works best in a dynamic, rapidly changing business environment, where management makes short-term plans. ⊚ true ⊚ false
267) It may be difficult to utilize the management by objectives (MBO) model when employees have not agreed upon the goals set by top management. ⊚ true ⊚ false
268) According to Victor Vroom, the effort employees exert on a specific task depends on their expectations of the outcome. ⊚ true ⊚ false
269) According to Victor Vroom's expectancy theory, employee expectations play little part in motivating employees on the job. ⊚ true ⊚ false
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270) Vroom's expectancy theory contends that prior to committing maximum effort to a task, employees want to know if they can accomplish the task and if it will equally reward everyone at work, even if others were not involved in the accomplishment of the task. ⊚ true ⊚ false
271) According to expectancy theory, one of the things employees want to know before they commit to making a maximum effort on a task is whether the reward for accomplishing the task is worth the effort. ⊚ true ⊚ false
272) Expectancy theory says that employees will be motivated if (1) they can actually accomplish the task; (2) they will be rewarded for their achievement; and (3) the reward will be worthy of their effort. ⊚ true ⊚ false
273) Researchers David Nadler and Edward Lawler modified Maslow’s hierarchy when they asserted that managers should set performance standards that encourage employees to achieve self-actualization. ⊚ true ⊚ false
274) According to expectancy theory, employees in a given organization tend to have very similar expectations. ⊚ true ⊚ false
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275) The basic principle of equity theory is that employees try to maintain fairness between their efforts and their compensation compared to others in similar positions. ⊚ true ⊚ false
276) Equity theory tells us that when employees perceive inequitable treatment, they will respond in a manner that will attempt to reestablish fairness. ⊚ true ⊚ false
277) According to equity theory, if employees perceive that their level of effort is greater than their compensation, they will work to increase their productivity. ⊚ true ⊚ false
278) Equity theory suggests that if employees perceive inequity in the workplace, they might respond with reduced productivity, higher absenteeism, or even voluntary resignation. ⊚ true ⊚ false
279)
Equity judgments are based on fact, which results in minimal errors. ⊚ true ⊚ false
280) The best strategy to deal with a perceived inequity in the compensation of different employees is to require that salaries and other forms of compensation are kept secret. ⊚ true ⊚ false
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281) When a manager coaches an employee, he or she is working with the employee and even doing some of the work if that is necessary to complete the task. ⊚ true ⊚ false
282) A major problem with the MBO approach is that it provides no way for employees to provide input into the goal-setting process. ⊚ true ⊚ false
283) According to expectancy theory, worker motivation almost always increases when employees are assigned a very challenging task. ⊚ true ⊚ false
284) Most employees put great value in being treated fairly. According to equity theory, if things seem unfair, they will do their best to make them equitable by withholding effort, increasing effort, or by rationalizing that they are undeserving of the same as others. ⊚ true ⊚ false
285) Joshua is disappointed with the effort his employees are putting forth. According to expectancy theory, Joshua could improve employee performance by setting more ambitious performance standards that exceed the ability of most employees to attain them. ⊚ true ⊚ false
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286) Mallory works for a garden design business. Her employer asked if she could work overtime this weekend to finish a job for a significant client. According to expectancy theory, Mallory will want to compare the compensation or other rewards offered by her employer to the extra effort involved before she decides whether to agree to the job. ⊚ true ⊚ false
287) You get a lower grade in a course than your friend did even though you studied more during the semester and attended class more often. As a result, equity theory predicts that you might convince yourself that "Grades aren't all that important. After all, lots of people who succeed in the real world didn't make good grades in school." ⊚ true ⊚ false
288) Carla owns her own delivery service and is a strong advocate of equity theory. Because of her acceptance of this theory, she is likely to assure employees that they are compensated in a way that reflects their efforts and contributions relative to those of other employees. ⊚ true ⊚ false
289) As a human resources manager for your company, you are looking for ways to motivate employees to favor your company over competitors. The company cannot afford to offer a wide array of benefits, but you are confident that if you survey employees and provide them the opportunity to vote on the benefits that are most important to them, they will see this as a fair and equitable way to operate. ⊚ true ⊚ false
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290) Nano Inc, a medical technology firm, has four locations throughout the Midwest. Jenna is a marketing specialist at the oldest location. Her colleagues at the other sites get an hour off each day to work out because there are gym facilities at those locations. While Jenna knows she makes a little more money than they do, she realized that the extra compensation does not cover the cost of her own gym membership. Jenna is now keeping tabs on marketing positions that may open at the other sites. Equity theory suggests that she is motivated to bring a sense of fairness to what she perceives as an inequity. ⊚ true ⊚ false
291) You are a graduate student in the chemistry department at Hilltop University. Several of your graduate student friends have positions in the business and English departments. While everyone's compensation and employee benefits are exactly the same, your department requires you to always show up and tutor students at least 4 hours each day and to serve on one university committee each semester. Your friends in the other departments are not required to follow these rules. Lately, you are doing your best to limit your daily obligation to 2 hours each day. Relating your situation to one of the theories we have studied, your goal of limiting inputs is explained by expectancy theory. ⊚ true ⊚ false
292) Glen, the marketing director for All Green Golf Resort, is making plans for the annual tournament. In past years, the resort successfully raised $25,000 through registration fees and sponsorship. Glen knows he could easily attract some great local talent if he made the top prize $10,000. However, Glen also knows he cannot afford to announce a $10,000 top prize at the expense of losing out on the fees of less talented players who may decide not to register. Using expectancy theory rationale, he explains to the general manager that if they set the prize too high, several better-than-average golfers in the area will feel "out of their league" when the top players join in and therefore will be unmotivated to spend their money to participate. Glen’s analysis of the situation sounds reasonable to the general manager ⊚ true ⊚ false
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293) Based on Herzberg's theory of motivators, interest in the work itself does not affect the motivation level of employees. ⊚ true ⊚ false
294) Job enrichment is based on Herzberg's higher motivators, such as responsibility, achievement, and recognition. ⊚ true ⊚ false
295) Job enlargement is about breaking down a sizeable job into smaller parts so that the employee is not overwhelmed by a large task. ⊚ true ⊚ false
296) When practicing job enrichment, skill variety is one of the characteristics of work that lead to improved motivation and performance. ⊚ true ⊚ false
297) Using job enrichment strategy, management can contribute to improved motivation and worker performance primarily by increasing employee pay. ⊚ true ⊚ false
298) Feedback enhances worker motivation by giving employees a feeling of achievement and recognition. ⊚ true ⊚ false
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299) Task identity refers to the degree to which a job has a substantial impact on the lives or work of others in the company. ⊚ true ⊚ false
300) Job simplification attempts to increase task efficiency by breaking the job into simple steps and assigning people to perform each of those steps. ⊚ true ⊚ false
301) Job simplification is an effective strategy for managers who want to achieve job enrichment. ⊚ true ⊚ false
302) Job enlargement is the strategy of assigning employees to different jobs within the organization on a regular basis. ⊚ true ⊚ false
303) Job enlargement attempts to enrich jobs by combining a series of tasks into one challenging and interesting assignment, as opposed to simplifying the job. ⊚ true ⊚ false
304) Job rotation attempts to make a job more interesting and motivating by allowing employees to make their own decisions regarding their workflow.
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⊚ ⊚
true false
305) As part of an open communication strategy, management should reward upward communication, even if it is negative. ⊚ true ⊚ false
306)
Open communication is a verbal strategy. It does not involve listening. ⊚ true ⊚ false
307) Open communication strategies include the removal of physical barriers such as separate offices. ⊚ true ⊚ false
308) As a motivational technique, open communication is enhanced when management provides several opportunities for employees to congregate and share ideas. ⊚ true ⊚ false
309) Asking employees to address executives by their last name but addressing workers at lower levels by first name is a barrier to open two-way communication within an organization. ⊚ true ⊚ false
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310) By the time they graduate from high school, most people have received ample training to develop good listening skills. ⊚ true ⊚ false
311)
To implement self-managed teams, managers at most companies must reinvent work. ⊚ true ⊚ false
312) The first step in any motivational program is to establish open communication among employees in order to encourage teamwork and cooperation. ⊚ true ⊚ false
313) In order to encourage teamwork in self-managed teams, top management must create an organizational culture that allows autonomy, decentralizes authority, and rewards good work. ⊚ true ⊚ false
314) As a motivational technique, letting employees know they've done a good job is not as powerful as providing them with a bonus. ⊚ true ⊚ false
315) Progressive managers are rewarding good work in all kinds of ways including more vacation days, thank-you events, and just letting everyone know when someone does a good job. ⊚ true ⊚ false
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316)
Feeling underappreciated is a common reason people leave their jobs. ⊚ true ⊚ false
317) Managers who believe job enrichment can effectively improve motivation would try to give employees a significant degree of freedom and flexibility in scheduling their work and in determining the procedures they use. ⊚ true ⊚ false
318) The key to achieving task identity is to design jobs that demand the use of many different skills. ⊚ true ⊚ false
319)
Job simplification reduces task efficiency. ⊚ true ⊚ false
320)
Feedback helps enrich a job by satisfying an employee's esteem needs. ⊚ true ⊚ false
321) One way for a firm to improve motivation among employees is to establish special restrooms, dining areas, and parking areas for top executives. ⊚ true ⊚ false
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322) If managers want to retain their employees, a good strategy may involve mentoring them for more senior roles in the organization and providing opportunities for job advancement. ⊚ true ⊚ false
323) According to the box “Adapting to Change,” companies now have access to more tools that help them track the mood of employees. ⊚ true ⊚ false
324) Ultra Clean Industries regularly moves employees from one job to another to improve motivation. Ultra Clean’s strategy is job enlargement. ⊚ true ⊚ false
325) Management at the Lush Lawn Care Service Corp. is trying to improve task efficiency by breaking down jobs into simple steps and assigning each step to a different worker. The key benefit of this approach is that it is one of the most effective ways to achieve job enrichment. ⊚ true ⊚ false
326) In the accounting department of a large corporation, Tyrell supervises several employees. He makes it a priority to give his team direct and clear information about their job performance. Tyrell’s efforts are likely to improve worker motivation. ⊚ true ⊚ false
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327) Vern is president and CEO of Choco-D-Lite Chocolate Company. He wants to encourage more open two-way communication among the company’s employees and managers. One of the most important things Vern can do to achieve this goal is to become a good listener. ⊚ true ⊚ false
328) During their first years at Inline Industries, management trainees spend a mandatory two months in each of six different departments. In this time, they have the opportunity to learn skills in each functional area, and also to decide where they have the best match. This demonstrates the concept of job rotation. ⊚ true ⊚ false
329) At Grid Graphics, employees working at the company's headquarters may decide to situate in a different place each day, such as in the projection room, in a temporary soundproof room, or in one of several lounge areas in the building. They may locate next to someone outside of their functional area. Grid Graphics management supports the belief that breaking down barriers fosters more communication and innovation and makes jobs more interesting. ⊚ true ⊚ false
330) Eric’s manager often tells the employees "there isn't a lot of time for idle talk on the job. If you want to give us your opinion, as a believer in open communication, I'll gladly give you your chance to speak your mind, on your way out!" This manager is up to date on the purpose of the exit interview, as an important source of feedback for companies. Open communication always begins at this juncture. ⊚ true ⊚ false
331) Regardless of cultural background, most employees respond the same way to motivational approaches.
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⊚ ⊚
true false
332) High-context cultures tend to jump right in and get work done without worrying about developing close work relationships. ⊚ true ⊚ false
333)
In a high-context culture, group trust is not required in order to accomplish a task. ⊚ true ⊚ false
334) In a low-context culture, employees are less likely to place emphasis on relationship building. They want to jump right in and get the job done. ⊚ true ⊚ false
335) Even if there are cultural differences across the globe, reward preferences do not vary across cultures. ⊚ true ⊚ false
336) If rewards are an important part of an international firm's motivational strategy, consideration should be given to adjusting rewards for cultural preferences. ⊚ true ⊚ false
337)
Most Gen X managers are likely to be flexible and good at collaboration.
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⊚ ⊚
true false
338) One of the disadvantages associated with a Gen X manager is their unwillingness to provide feedback to employees. ⊚ true ⊚ false
339)
As a group, Millennials tend to be impatient, skeptical, and image-driven. ⊚ true ⊚ false
340)
Millennials tend to be adaptable, tech-savvy, and tolerant. ⊚ true ⊚ false
341)
Gen Xers are difficult to motivate because they lack ambition. ⊚ true ⊚ false
342)
Gen Xers and Millennials tend to expect change more than Baby Boomers. ⊚ true ⊚ false
343) Gen Zers grew up post-9/11, in the wake of the Great Recession, and amid countless reports of school violence.
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⊚ ⊚
true false
344) One characteristic of a Gen Zer is that they tend to hide from rather than confront a problem. ⊚ true ⊚ false
345) It is important when dealing with today's culturally diverse workforce that managers maintain a consistent motivational approach for everyone. ⊚ true ⊚ false
346) If you want to understand what motivates Gen X workers, it might be a good idea to study the personal experiences that this group shared, such as stay-at-home moms and dads that worked very steady nine-to-five jobs, with hardly any fear of layoffs. ⊚ true ⊚ false
347) Gen Xers consider career security more valuable than job security and are willing to change jobs until they find it. ⊚ true ⊚ false
348) As Gen Zers are starting to enter the workforce, they are likely to be less cautious and unmotivated to make improvements in the world around them. ⊚ true ⊚ false
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349) According to the box “Connecting Through Social Media,” Millennials expect and embrace regular feedback in the workplace. ⊚ true ⊚ false
350) Maggie, a Gen Xer, has just been promoted to an upper management position. If she is like many of her generation, one of Maggie’s biggest problems will likely be her inflexibility and difficulty at working collaboratively with other employees. ⊚ true ⊚ false
351) Jonathan is putting together an employee group to help add technology to his company's existing products. He is looking for employees that are comfortable with new technologies, and who are flexible, adaptable, and have a strong sense of commitment to their work. Many of his company's Millennial employees probably would meet these criteria. ⊚ true ⊚ false
352) Trevor was asked by his team leader to explore and evaluate the best ways to communicate with customers through social media. Although Trevor is relatively new to the company, and is not well-versed on the entire product line, he is a Millennial, which makes him overall well-suited to knowing how people find things in common with others in an online environment. ⊚ true ⊚ false
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Answer Key Test name: chapter 10 8) D 9) C 10) D 11) C 12) A 13) B 14) C 15) A 16) C 17) A 18) C 19) A 20) D 21) C 22) D 23) C 24) B 25) C 26) A 27) B 28) D 29) C 30) C 31) B 32) A 33) D
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34) A 35) B 36) C 37) C 38) D 39) A 40) B 41) D 42) A 43) B 44) D 45) D 46) A 47) D 48) D 49) B 50) D 51) B 52) C 53) D 54) B 55) D 56) D 57) C 58) A 59) C 60) A 61) B 62) C 63) B
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64) C 65) B 66) D 67) D 68) C 69) D 70) A 71) C 72) C 73) B 74) D 75) C 76) B 77) A 78) C 79) D 80) A 81) C 82) A 83) D 84) C 85) D 86) C 87) D 88) C 89) B 90) A 91) D 92) D 93) A
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94) A 95) B 96) B 97) D 98) C 99) B 100) A 101) C 102) A 103) D 104) A 105) B 106) A 107) C 108) C 109) A 110) C 111) D 112) A 113) B 114) D 115) D 116) B 117) D 118) C 119) B 120) C 121) C 122) B 123) D
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124) C 125) A 126) B 127) C 128) D 129) C 130) B 131) D 132) D 133) A 134) B 135) A 136) D 137) B 138) A 139) C 140) D 141) A 142) D 143) B 144) B 145) C 146) B 147) B 148) D 149) D 150) A 151) A 152) B 153) D
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154) A 155) A 156) D 157) C 158) A 159) C 160) C 161) D 162) B 163) A 164) B 165) C 166) C 167) B 168) C 169) D 170) C 171) D 172) C 173) B 174) C 175) Section Break 175.1) C 175.2) D 175.3) C 175.4) A 176) TRUE 177) TRUE 178) FALSE 179) FALSE
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180) FALSE 181) TRUE 182) FALSE 183) TRUE 184) FALSE 185) FALSE 186) TRUE 187) TRUE 188) FALSE 189) TRUE 190) FALSE 191) TRUE 192) TRUE 193) FALSE 194) TRUE 195) FALSE 196) TRUE 197) FALSE 198) FALSE 199) FALSE 200) TRUE 201) TRUE 202) FALSE 203) FALSE 204) FALSE 205) FALSE 206) FALSE 207) FALSE 208) FALSE 209) TRUE
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210) TRUE 211) FALSE 212) TRUE 213) FALSE 214) FALSE 215) TRUE 216) FALSE 217) TRUE 218) TRUE 219) FALSE 220) TRUE 221) TRUE 222) TRUE 223) TRUE 224) TRUE 225) TRUE 226) FALSE 227) TRUE 228) FALSE 229) FALSE 230) TRUE 231) FALSE 232) TRUE 233) FALSE 234) TRUE 235) FALSE 236) FALSE 237) FALSE 238) TRUE 239) FALSE
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240) TRUE 241) FALSE 242) FALSE 243) FALSE 244) TRUE 245) FALSE 246) FALSE 247) TRUE 248) FALSE 249) FALSE 250) TRUE 251) TRUE 252) FALSE 253) TRUE 254) FALSE 255) FALSE 256) TRUE 257) TRUE 258) FALSE 259) FALSE 260) TRUE 261) TRUE 262) FALSE 263) TRUE 264) TRUE 265) TRUE 266) FALSE 267) TRUE 268) TRUE 269) FALSE
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270) FALSE 271) TRUE 272) TRUE 273) FALSE 274) FALSE 275) TRUE 276) TRUE 277) FALSE 278) TRUE 279) FALSE 280) FALSE 281) FALSE 282) FALSE 283) FALSE 284) TRUE 285) FALSE 286) TRUE 287) TRUE 288) TRUE 289) FALSE 290) TRUE 291) FALSE 292) TRUE 293) FALSE 294) TRUE 295) FALSE 296) TRUE 297) FALSE 298) TRUE 299) FALSE
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300) TRUE 301) FALSE 302) FALSE 303) TRUE 304) FALSE 305) TRUE 306) FALSE 307) TRUE 308) TRUE 309) TRUE 310) FALSE 311) TRUE 312) TRUE 313) TRUE 314) FALSE 315) TRUE 316) TRUE 317) TRUE 318) FALSE 319) FALSE 320) TRUE 321) FALSE 322) TRUE 323) TRUE 324) FALSE 325) FALSE 326) TRUE 327) TRUE 328) TRUE 329) TRUE
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330) FALSE 331) FALSE 332) FALSE 333) FALSE 334) TRUE 335) FALSE 336) TRUE 337) TRUE 338) FALSE 339) TRUE 340) TRUE 341) FALSE 342) TRUE 343) TRUE 344) FALSE 345) FALSE 346) FALSE 347) TRUE 348) FALSE 349) TRUE 350) FALSE 351) TRUE 352) TRUE Student name:__________ 1) Dramatic changes in the U.S. labor force will make the work of human resource managers more interesting, and more difficult, in the future. Identify and describe three trends that will challenge future human resource managers.
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2)
Identify and describe three common methods of training and developing employees.
3) What is the purpose of a performance appraisal? What are the major steps involved in the performance appraisal process?
4) What are the key features of flextime plans, compressed workweeks, and job-sharing plans? Discuss the advantages and disadvantages of these approaches to scheduling employees.
5) What are the main provisions of the Americans with Disabilities Act, and how have these provisions affected human resource management in American companies?
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6) __________ is the process of evaluating human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals. A) Staffing B) Performance grouping C) Human resource management D) Job analysis
7)
The ultimate resource of a firm is its A) business plan. B) marketing mix. C) capital budget. D) employees.
8)
One of the key functions of human resource management is A) marketing. B) recruiting. C) budgeting. D) auditing.
9) Today, human resource management has become so important that in many firms it has become
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A) a function performed by managers in all areas of the organization. B) the sole responsibility of the firm's legal staff. C) a function handled only by specialists in the human resource department. D) a function handled only by the firm's top management.
10)
__________ workers have a higher skill level than their current job requires. A) Seasonal B) Temporary C) Telecommuter D) Underemployed
11) The changes in the American business system that have had the most dramatic impact on the workings of the free enterprise system are the changes in A) the labor force. B) technology. C) financial regulations. D) consumer behavior.
12) In coming years, high-tech growth areas such as computer technology, biotechnology, and robotics are likely to experience a A) surplus of labor. B) significant decline in market demand, leading to a stagnant labor market. C) shortage of skilled labor. D) stable equilibrium in the labor market.
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13) Which statement best describes the current view of the role of human resource management within a firm? A) Human resource management is largely a clerical function that involves keeping records, processing payroll, and making sure that federal regulations are met. B) Human resource management has become so complex that only highly trained specialists should make human resource decisions. C) Human resource management functions have become so important that in many firms all managers now perform them. D) Changes in technology have largely done away with the need for a separate human resource department.
14)
What is a challenge facing human resource managers of today? A) too many unemployed scientists and computer engineers B) an increasing number of Gen Yers in the workforce C) a shift in employee attitudes toward work D) an increased demand for uniformity in benefits offered to employees
15) Which statement about human resource management opportunities and challenges is most accurate? A) The age composition of the labor force is becoming younger. B) Workers are becoming less loyal to their firms, resulting in higher turnover. C) Workers are now demanding that more of their compensation be in wages and salaries and less in fringe benefits. D) The number of workers who have received training in high-tech fields far exceeds the number of job openings in these areas.
16) Which statement about human resource management opportunities and challenges is most accurate?
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A) Shifts in the economy have led to a huge pool of skilled and unskilled workers from declining industries that are either unemployed or are underemployed. B) Workers now would rather have more income rather than more leisure. Therefore, many employees now want to work more than 40 hours per week. C) So many people have sought training in high-tech areas such as robotics and computers that there is likely to be a huge surplus of labor in high-tech industries. D) Workers now desire more stability and predictability in their careers, so they now give their employers more loyalty and expect more loyalty from their employers in return.
17) Six years ago, Reggie lost his job as a highly skilled craftsman at a wood fabricators shop. Before accepting a job as a maintenance worker at a local retirement community, he searched for a job similar to his old trade for several months. While he is happy to have employment, he is frustrated that he had to settle for a job that did not take full advantage of his skills. Reggie is a(n) A) structurally unemployed worker. B) semi-employed worker. C) underemployed worker. D) quasi-employed worker.
18) Rick is a human resource manager at a nonprofit. If Rick's organization is like most companies today, which statement about his job is likely to be the most accurate? A) Most of Rick's time will be devoted to clerical duties such as processing payroll checks and keeping employee files updated. B) Rick's job will be simpler in the future than it was in the past, because the percentage of new workers entering the labor force who are poorly educated and unprepared for work is slowly but steadily declining. C) Government laws and regulations concerning hiring, worker safety, pay, and unionization will make Rick's work complex and challenging. D) Rick and his fellow human resource managers will be given complete responsibility for performing all human resource functions within the organization.
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19)
One aspect of Title VII of the Civil Rights Act of 1964 is that it
A) gives all citizens over the age of 18 the right to vote regardless of race, religion, sex, or creed. B) prohibits firms from using employment testing as a means of selecting employees and determining which employees should be promoted. C) requires all firms with over 100 employees to have an affirmative action plan. D) prohibits discrimination based on race, religion, sex, creed, or national origin in matters such as hiring, firing, training, and compensation.
20) The __________ was created by the Civil Rights Act of 1964 and has since become a formidable regulatory force in the administration of human resource management. A) National Labor Relations Board (NLRB) B) AFL-CIO C) Equal Employment Opportunity Commission (EEOC) D) Affirmative Action Transition Commission (AATC)
21)
What was the result of the Civil Rights Act of 1991?
A) It declared affirmative action plans unconstitutional. B) It requires any firm with over 600 employees to file an annual report with the Department of Labor identifying the steps it has taken to eliminate discriminatory practices. C) It allows victims of discrimination to seek punitive damages. D) It is the first law to declare reverse discrimination illegal.
22) The __________ protects individuals over the age of 40 from discrimination based on age with respect to issues such as hiring, promotions, job benefits, and assignments.
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A) Age Discrimination in Employment Act of 1967 B) Equal Employment Opportunity Act of 1998 C) Fair Labor Standards Act of 1938 D) Employee Rights and Responsibilities Act of 1983
23) Employers must verify that employment candidates are eligible to work in the United States as mandated by the A) Manpower Development and Training Act. B) Civil Rights Act of 1991. C) Immigration Reform and Control Act. D) Occupational Safety and Health Act.
24)
The Family and Medical Leave Act provides
A) paid leave for women who choose to stay home with newborn infants. B) unpaid leave of up to 12 weeks for men and women for the birth or adoption of infants, or in the case where it is necessary to care for an immediate family member who may be ill. C) unpaid leave of up to 6 weeks for couples (male or female) who have a new baby. D) extended re-employment training to parents after maternity leave is completed.
25) An important U.S. government organization charged with setting human resource management guidelines is A) the EEOC (Equal Employment Opportunity Commission). B) the OSHA (Occupational Safety and Health Administration). C) the WPA (Works Progress Administration). D) the MPDA (Manpower Development Administration).
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26)
According to U.S. business law, accommodation means
A) treating all employees fairly. B) making certain that if one employee gets medical leave during a fiscal year, that all other employees get an equal amount of leave during the year. C) careful consideration before firing someone and hiring two younger persons to replace him/her. D) providing services for employees according to their specific needs.
27)
Affirmative action is a government response to what aspect of a business? A) environmental policies B) financial practices C) marketing and advertising policies D) employment practices
28) The Equal Employment Opportunity Act gave the Equal Employment Opportunity Commission the authority to A) prevent firms from firing workers based on union affiliation. B) issue guidelines for employer conduct in administering equal employment opportunity programs. C) set salary schedules for protected groups. D) require firms to pay women and minority workers more than white males for the same work.
29)
The ban-the-box rule affects companies by
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A) limiting the number of affirmative action cases it can undertake. B) forcing companies to report the percentage of air and water pollutants it emits. C) requiring them to post all job openings publicly. D) prohibiting employers from asking questions about convictions on job applications.
30)
Which statement about how current HR law views disabilities is accurate?
A) The law varies depending upon how the employee acquired the disability. B) Disabilities include diseases such as epilepsy, autism, and diabetes. C) Disabilities refer to physical but not mental disorders. D) Any disorder does not require the employee to adapt the work environment to accommodate the employee.
31)
One of the most important responsibilities for professionals in the HR field is A) understanding the ethical perspective of each employee. B) filing employee medical claims. C) to always "right past wrongs." D) staying current with employment-related legislation.
32) Which statement is the most accurate description of the impact the Americans with Disabilities Act of 1990 (ADA) has on businesses? A) ADA has had no real impact, since most businesses have always been sensitive to the needs of disabled workers. B) Most firms have found that the structural changes needed to comply with ADA requirements have been very difficult and expensive to implement. C) Most firms are finding that some accommodations required by ADA are more difficult to implement than the structural changes. D) Businesses have found that even with the changes required by ADA, disabled workers are simply not capable of handling most types of jobs.
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33) Brenda is coming up on her thirtieth year as a bus driver. Recently her company told her that she would be required to retire within the next two years because she had reached the age limit for mandatory retirement. Brenda wants to fight this ruling based on a claim of age discrimination. Which statement about this case is most accurate? A) According to the Employment Rights and Responsibilities Act, Brenda has every right to keep her job as long as she has not been convicted of a moving traffic violation while performing her job. B) According to the Affirmative Action Enforcement Act, Brenda has no right to keep her job, because she is not one of the groups that qualify for special protection. C) According to the Fair Labor Standards Act, Brenda may be able to keep her job, but the company can require her to pass an annual vision and hearing exam as a condition of continued employment. D) According to the Age Discrimination in Employment Act, Brenda can be required to retire at a certain age, because she is in an occupation where evidence exists that ability to perform the job diminishes significantly with age.
34) Jen Richardson was hired as a management trainee by Creshton Corporation through a special program designed to "right past wrongs" by giving women and minorities greater opportunities for employment and advancement. The program is enforced by the Equal Employment Opportunity Commission. Jen was hired through a(n) __________ program. A) discrimination alleviation B) cultural diversity C) fair labor standards D) affirmative action
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35) During her annual review, Rachel admitted to her supervisor that she is more productive in a quieter environment. The openness of her office setting and the recent increase in staff that came to her for training made it difficult for her to process as many driver application forms in one day as she had in the past. The supervisor agreed to move Rachel’s desk to the back of the office and create a barrier with plants. The supervisor would take a more active role in training new employees, so they would not be coming to Rachel with questions. In HR, we refer to this action as creating A) accommodations. B) barriers to entry. C) job enlargement. D) consideration.
36) In 2011, Congress passed the Americans with Disabilities Amendments Act. What was the scope of the changes? A) This law placed added emphasis on the hiring of employees with "visible" disabilities. B) This law decreased the fine for businesses that do not employ disabled persons but followed through with a tax break for businesses who hire disabled citizens. C) The amendment widened the scope of what disabilities are covered under the act. D) In light of so many soldiers coming back from the war, the amendment re-focused disabilities to include only physical disabilities.
37) As new parents, Frank and Jeremy applied for family medical leave to care for their new infant son. According to U.S. law, Frank and Jeremy A) are not paid during the 12-week period that each elect to take. B) are each paid as a half-time employee during the 12-week leave period. C) must each take the full amount of family medical leave time. D) must both be salaried workers in order to qualify for any family medical leave time.
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38)
The first step in the human resources planning process is to A) prepare a forecast of human resource needs. B) assess future labor demand. C) prepare job specifications for each position within the organization. D) prepare a human resource inventory.
39)
The last step of the human resource planning system is to
A) publish a human resource inventory listing the names, ages, job titles, skills, and other pertinent information for all employees in the organization. B) develop an affirmative action statement to explain how the company will meet federal government guidelines on hiring and promotions. C) hold a general meeting to explain the impact of the plan to employees. D) establish a strategic plan for recruiting, selecting, training, appraising, compensating, and scheduling the labor force.
40) A(n) __________ is prepared as part of the human resource planning process, and indicates the characteristics and qualifications of the organization's labor force, thus helping the firm determine whether its employees are technically up-to-date and adequately trained. A) job analysis B) performance appraisal C) human resource inventory D) organization chart
41)
A __________ explains what an employee would actually do at various jobs. A) job analysis B) performance appraisal C) job assessment D) job title review
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42)
A job analysis results in two written statements. They are A) the human resource inventories and the affirmative action statement. B) the labor supply assessment and the labor demand assessment. C) the job description and the job specification. D) the job title review and the performance appraisal.
43) A __________ is a statement that identifies the minimum qualifications required of a worker in order to perform a specific job. A) job description B) performance criteria review C) human resource inventory D) job specification
44) A job __________ is a statement that identifies the objectives of a job, the type of work to be done, the responsibilities and duties that are associated with the job, the working conditions, and the relationship of the job to other functions. A) specification B) description C) evaluation D) analysis
45)
After preparing a job analysis, the next step in the human resource planning process is to A) develop a human resource inventory. B) assess future human resource demand. C) develop a human resources budget. D) establish a strategic plan.
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46) The __________, which is developed based on the previous four steps of the human resource planning process, addresses how the firm will accomplish a wide array of human resource functions such as recruiting, selecting, training and developing, appraising, compensating, and scheduling its employees. A) strategic plan B) tactical plan C) job specification D) Gantt chart
47)
A human resource inventory is designed to reveal whether A) all workers are paid a fair wage. B) the firm has enough land and capital to use with its labor. C) the firm's labor force is technically up-to-date and well trained. D) worker morale is high or low.
48) As part of the HR planning process, the manager begins by assessing the current labor situation at the company. Essentially, this means A) preparing job analyses. B) comparing the number of employees to the number of available positions. C) preparing job specifications. D) taking an inventory of current employees and their capabilities.
49)
What is an essential element of a job description?
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A) the minimum educational qualifications workers must have to fill the position B) the responsibilities and working conditions C) the skills required to hold the position D) the age of the person that should hold the job
50) Which statement identifies a key difference between a job description and a job specification? A) A job description is concerned with the short-run objectives of a job, but a job specification is concerned with the job's long-run objectives. B) A job description is based on a human resource inventory, while a job specification is the result of a performance appraisal. C) A job description is a statement about the job, while a job specification is a statement about the person who does the job. D) A job description is a brief summary of what a job involves, while a job specification is a detailed and technically complete statement of what a job involves.
51)
When creating a job description, the HR manager may include
A) the minimum education required for the position. B) the number of unpaid leave days the employee can take while at this position. C) the specific responsibilities of the job. D) a prediction of the number of similar positions that the company will need during the next two to five years.
52)
The overall purpose of the five-step human resource planning process is to A) protect the company from lawsuits from employees who claim discrimination. B) develop a workforce that is better educated than the workforce of competitor firms. C) eliminate needless job specifications. D) determine the number and types of employees needed by the firm.
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53) As Connor scanned the employment opportunities on LinkedIn, he speculated that he might not qualify for some of the jobs. Connor was concerned that his education and skills might not be compatible with the __________ for many of today's available jobs. A) job analyses B) job descriptions C) job specifications D) job database
54) William is gathering information about the names, ages, education, specialized skills, and capabilities of all of his firm's employees. The information William is acquiring suggests he is working on a A) performance evaluation. B) human resource inventory. C) job description. D) Gantt chart.
55) In order to capture more business, Christy would like to hire a few more sales professionals to sell into new markets. As she contemplated her staffing needs, her friend who works in HR informed her that she needed to do a job analysis before hiring. What would be a logical part of a job analysis for a sales position? A) asking the current sales reps to create a log of their daily and weekly activities B) asking the HR specialist to create an online application for the position(s) C) training new recruits D) determining how many sales reps other companies typically have on staff
56) Farah, an HR manager at Just Right Services, needs to know how many current employees have certain types of skills and training to perform new services the company wants to offer. A document that would help Farah answer this question is the firm's
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A) strategic plan. B) human resource inventory. C) organization chart. D) social audit.
57) Flair Electronics requires all employees who work as research specialists in its electrical engineering department to have a minimum of a bachelor's degree in electrical engineering (BSEE). This educational requirement would most likely be stated in the job __________ for this position. A) analysis B) description C) designation D) specification
58) Edwin is an HR manager at ComCore. Which task would he perform as a part of the human resource planning process? A) forecast future human resource requirements for his company B) appraise the performance of individual workers at his company C) establish the budget for the human resource department D) interview potential workers
59) Manuel believes that, due to changing technology, the minimum skill level that his company is requiring for technology-intensive jobs should be increased to include knowledge and experience in higher-level programming applications. These new requirements would be reflected in __________ for various jobs at his company.
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A) the job description B) the job specification C) the human resource inventory D) the job application
60) Darren is a project manager for a large construction company. Each day his job requires him to prepare detailed reports of the progress of current projects assigned to him. Since this responsibility is something that he does on a regular basis, the HR professional for his company would list it as part of the __________ for Darren’s project management position. A) job description B) job specification C) human resource inventory D) job application
61) By doing a quick, one-minute search, an HR specialist determined who in her company knew programming language C++. The specialist used the company's database to retrieve the information; however, this information should also be part of the HR planning process, as found in A) specific job descriptions. B) the future labor supply assessment. C) the human resource inventory. D) the company training portfolio.
62) __________ is the set of activities for obtaining the right number of people at the right time in order to select those who best meet the needs of the organization.
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A) Pre-selection B) Recruitment C) Networking D) Logistics
63)
GlassDoor and Indeed are examples of A) web browsers. B) career interest surveys. C) websites that firms can use to recruit employees. D) magazines that list job opportunities by skills requirements and geographic location.
64) Promotions and transfers are __________ sources available to human resource managers in their recruiting efforts. A) internal B) external C) passive D) redundant
65) Advertisements, public and private employment agencies, and college placement offices are all __________ sources that human resource managers can use in the recruiting efforts. A) secondary B) passive C) back-up D) external
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66) Which strategy is used by a human resource manager to fill an open position from within the company? A) advertise the opportunity for a promotion to current employees B) seek the assistance of a public employment agencies C) send the job opening to Monster.com D) utilize the services of a private employment agency
67)
What is an example of an external recruitment source? A) college placement offices B) promotion of a current employee to a new position C) transfer of an employee in from a different office D) recommendations of employees
68)
Which situation makes the recruiting job more challenging?
A) The current emphasis on scientific management requires very specific job specification. B) Some organizations have policies that demand promotions from within that limit the pool of candidates. C) Reverse discrimination is essential to be sure that the workforce is balanced. D) There are far too many qualified candidates for each position, increasing the required paperwork.
69)
It is sometimes advantageous to hire from within because it A) eliminates the need to meet affirmative action regulations. B) ensures that the best qualified person gets the job. C) is less costly and helps maintain employee morale. D) allows the firm to effectively use the "employment at will" strategy.
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70)
Which statement about recruiting is most accurate?
A) It is important for a firm to recruit and hire people who are not only skilled but also fit in with the firm's culture and leadership style. B) Recruiting internally will almost always result in better-qualified applicants than recruiting externally. C) Small firms generally have a strong advantage when it comes to recruiting. D) One advantage of using external sources when recruiting is that this approach tends to result in higher morale among the firm's existing employees.
71) Sylvia received 300 resumes from the college placement office for the entry-level position at her marketing firm. She received these potential candidates from a(n) _____ source. A) external B) social C) media D) internal
72) Hillary is an HR manager with Cook ’n Bake Supplies. She needs to recruit sales professionals to fill several positions within her company. Hillary is likely to rely on external recruiting sources if she A) wants to eliminate the need to meet affirmative action regulations. B) believes that Cook ’n Bake’s current employees do not have the qualifications necessary to successfully fill the positions. C) places a great deal of importance on maintaining high morale for current workers. D) needs to keep the cost of her recruiting efforts to a minimum.
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73) As a human resource professional for a large company, Sandro is involved with the __________ process. His goal is to find the right number of qualified people at the right time. He will screen a qualified pool of candidates and send these individuals forward to others in the firm who will make the final selection decision. A) recruiting B) production C) organizing D) job orienteering
74) Marvin took a job with a company that strives to market several new consumer products each year. Prior to this position, he worked in a university research lab where he studied chemistry. He accepted the new position because the salary was significantly above what he previously made. Within a month at the new job, his manager began to have reservations about bringing him on board. Marvin seemed to prefer to work independently of others, and when he did interact with his new colleagues, he passed along subtle reminders of his extensive and superior academic credentials. From a recruitment standpoint, this situation serves as an indication of A) the benefits of shaking things up a little at work. B) the challenges of trying to convince long-term employees that they need to retrain and continue their education. C) the benefit of external recruitment over internal recruitment, even though in the short run, it may be the more costly approach for the company. D) the importance of finding talent that also fits well with the corporate culture.
75) When determining the human resources needs for a well-known engineering firm, the HR director realized that the company lacked engineers under the age of 30. The company could not afford to get caught short in this competitive business climate. An important recruitment strategy for the HR director's department was to start attending college fairs as well as considering hiring interns. We define his recruitment efforts as developing relationships with
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A) external sources. B) internal sources. C) median sources. D) civilian sources.
76) When managing your human resources, __________ is the process of deciding who should be hired, under legal guidelines, to serve the best interests of the individual and the organization. A) interviewing B) training C) appraisal D) selection
77)
The first step in the employee selection process is A) obtaining complete application forms. B) placing a help wanted ad. C) the initial interview. D) aptitude testing.
78)
During the employee selection process, the screening interview is often conducted by
A) the current workers in the applicant's department. B) a member of the human resources department. C) a selection committee consisting of managers from all departments within the organization. D) the company's affirmative action officer.
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79)
One of the main complaints made by critics of employment tests is that these tests A) fail to take the interests and personalities of the test takers into account. B) cannot measure basic competencies. C) may discriminate against certain groups. D) take so long to conduct and evaluate that they slow down the selection process.
80) A __________ is a check of a potential employee's work record, academic record, credit history, and recommendations. A) personality profile B) background investigation C) fidelity appraisal D) character review
81) As an important step in the human resource selection process, what will expedite the process of conducting background investigations and promises to get suitable results? A) Use hiring services such as GoodHire to conduct criminal checks and driving records. B) Dedicate one human resource expert to making personal calls and doing all the background checks. C) Minimize the types of questions the company asks at this juncture. D) If there is a need to skip one of the selection process steps, most companies eliminate this one.
82) tool?
According to the American with Disabilities Act, what is not an appropriate screening
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A) job-related knowledge tests B) personality tests C) background investigations D) medical exams
83) The selection process may include a(n) __________, where employment is only guaranteed for a specified period of time, until either a permanent offer is extended or the employee is discharged. A) intern period B) probationary period C) contingent period D) recruitment period
84) According to the box “Making Ethical Decisions,” the easiest way to distinguish a quality internship from one that is less than satisfactory is to A) review the tasks associated with the position. B) compare the hourly wage with other internship positions. C) ask the company if they plan to hire you full-time after the internship. D) understand that most internships require completion of menial tasks.
85)
What is a characteristic of employment testing?
A) It was declared illegal by the EEOC in 1989, because it was often used to discriminate against women and minorities. B) It is legal, but is a very poor predictor of worker performance. C) It should be directly related to the job. D) It should focus on the most basic and general skills rather than on skills directly related to the job.
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86)
Pre-employment physical examinations are A) an excellent way to screen out employees. B) legal in some states, but only if given to everyone applying for the position. C) illegal under current employment legislation in all 50 states. D) legal in all states, but seldom used.
87) What does the box feature “Putting Your Best Foot Forward” indicate about the use of a social media review in the job selection process? A) Most companies consider your online presence in evaluating you as a candidate. B) Less than one-fourth of employers use social media to screen prospective hires. C) Privacy laws restrict companies from considering job candidates’ online activities in hiring decisions. D) In today’s world, companies prefer that potential candidates have no digital footprint.
88)
In a gig economy, a gig is defined as A) any type of work involving clerical duties. B) the number of contingent workers required to complete a task. C) the ability for workers to complete a task outside of an office setting. D) a single project or task for which a worker is hired.
89)
What is a valid statement about contingent workers?
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A) Contingent workers are seldom skilled professionals. B) By law, employers must provide contingent workers the same salary and benefits as permanent employees. C) An increasing number of companies are hiring skilled professionals, such as accountants, as part of their contingent workforce. D) By law, companies cannot hire contingent workers as part of the management team.
90)
What is an advantage of hiring contingent workers?
A) They are more dependable because they are mature employees. B) When a company's work is very stable and steady, it is best to use contingent workers. C) When the tasks are very narrow in scope and specialized, it is best to use contingent workers. D) It is good strategy if the economic climate is uncertain.
91) Renee is a human resource manager currently involved in selecting employees. Which activity is Renee most likely to be working on in her present assignment? A) performing a job analysis B) writing a help wanted ad C) conducting an orientation program D) completing a background investigation
92) Once the job description and job specifications were written for a new marketing assistant position in his department, Roger called his HR specialist to proceed with the next step in the process of making a successful hire. After providing a timeframe for qualified persons to apply for the job, the next step in the selection process is best described as
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A) conducting background investigations. B) obtaining results from physical exams. C) conducting initial and follow-up interviews. D) establishing trial and probationary periods.
93) Claire is a human resource manager with Bright Start Industries. Her current assignment is to revise and update Bright Start’s employment testing procedures. Claire should A) design tests that are directly related to an applicant's ability to perform the job. B) write tests sufficiently difficult that only a small fraction of qualified workers can pass them. C) design tests that measure general aptitudes rather than ability to do the job. D) inform her superiors that such tests are now illegal.
94) Fresh Start Enterprises conducts thorough background investigations of its prospective employees. The purpose of such investigations is to A) meet federal reporting guidelines that require up-to-date work history for each candidate. B) identify those applicants that are most likely to succeed. C) implement the "employment at will" doctrine. D) discover whether the employee has ever worked for a competitor.
95) Casey’s Holiday Store typically sells over two-thirds of all its merchandise in November and December. Management has found that it must hire __________ workers during this period of increased business to supplement its permanent employees. A) nontenured B) apprentice C) contingent D) journeymen
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96)
Which of these workers would be the best example of a contingent worker?
A) an assembly-line worker who belongs to a union and has 17 years of seniority B) an accountant hired to help during the busy tax season C) an elementary school teacher who just received tenure D) an electrical engineer who frequently travels out of the country to the various manufacturing facilities owned and operated by his firm
97) Juanita relies on her summer income to pay for her next year of college. When she tried to get her old high school summer job back at local Yummy Yogurt Shoppe, she learned that the manager no longer hires college students during the summer months. Which strategy would you recommend that Juanita pursue? A) Contact temporary staffing companies. B) Realize that Yummy Yogurt always needs more sales associates in the summer and stay in contact with the management just in case. C) Look for a permanent position and quit as it gets closer to the time when Juanita will return to school. D) Seek the services of a resume consultant and pay to access a variety of employment tests so that you are prepared when the next job opportunity arises.
98) In just a few short weeks, Stefan will arrive back in the states after a semester abroad. He is already in a temp agency's database from the previous summer, when he spent 8 weeks working for an accounting firm. Stefan will again try to hire on as a(n) __________ during the summer months. The company that hired him last summer typically hires several college students each year since the company does not need to offer college students benefits. A) contingent worker B) intermediate worker C) primary worker D) apprentice
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99)
The purpose of __________ is to increase an employee's ability to perform productively. A) training and development B) employment tests C) contingency planning D) job enrichment
100)
Online training courses are sometimes also called A) contingency learning. B) synchronized learning. C) distance learning. D) vestibule training.
101)
The first step in establishing training and development programs is to A) establish appropriate simulation parameters. B) assess the needs of the organization and the skills of the employees. C) conduct pre-employment tests. D) start designing programs.
102) __________ introduces new employees to the organization, their fellow workers, their supervisors, and to the policies, practices, and objectives of the firm. A) Vestibule training B) Affirmative action C) Employee orientation D) Job specification
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103) In a(n) __________, an inexperienced worker learns by working alongside an experienced employee to master the skills and procedures of a craft. A) orientation period B) simulation period C) indentureship program D) apprenticeship program
104) In terms of employment, what is the current status of jobs in the welding and carpentry industry? A) There are so many people entering these fields it’s difficult to find work. B) There is currently a shortage of trained workers and more are needed. C) No one is retiring in this industry so there is little room for new recruits. D) The requirements for working in these fields is becoming less complex.
105) __________ is the easiest kind of training to implement when the job requires simple tasks and/or is repetitive. A) Vestibule training B) Job simulation C) On-the-job training D) An employee boot camp
106)
Shadowing is another term used to refer to A) job rotation. B) vestibule training. C) role playing. D) on-the-job training.
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107) Computer and robotics training is sometimes performed in a nearby classroom-type setting. We refer to this near-the-job-training as A) vestibule training. B) orienteering. C) apprenticeship training. D) mentoring.
108) __________ is a type of training that duplicates the exact combination of conditions that occur on the job. A) Modular training B) Job simulation C) Apprentice training D) Performance feedback
109)
Off-the-job training is changing and today it
A) is further development that occurs at the workplace, but after scheduled work hours. B) focuses only on the skills needed to perform the job. C) may include higher education. D) is training that all employees should take, on their own, in order to stay competitive in their career field.
110) __________ is the process of training and educating employees to become good managers and then developing their managerial skills over time.
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A) Management development B) Vestibule training C) Pre-mentoring D) Self-actualization training
111) Corporate managers who supervise, coach, and guide lower-level employees and serve as their organizational sponsors are called A) networkers. B) contingent workers. C) mentors. D) corporate guides.
112) __________ is the process of establishing and maintaining contacts with key managers in one's own organization and in other organizations and using those contacts to establish strong relationships that serve as informal development systems. A) Training B) Social integration C) Orienteering D) Networking
113) A management training program that gives managers assignments in a variety of departments in order to expose them to different functions within the organization is called A) job enlargement. B) vestibule training. C) job rotation. D) an apprenticeship program.
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114) Selected employees who work as assistants to higher-level managers and participate in managerial functions until they are ready to work in these positions themselves are given such titles as A) second in command. B) benefactor. C) underwriter in process. D) understudy.
115) Which statement describes the relationship between employee training and employee development? A) They are just two names for the same thing. B) Training is short-term skills oriented while development is long-term career oriented. C) Development is provided by the company and is designed to meet the specific needs of the organization, whereas training focuses on more general skills and normally is provided by schools, colleges, and institutions other than the employer. D) Training focuses on conceptual skills while development seeks to improve technical skills.
116)
A major purpose of employee orientation programs is to
A) initiate new employees to the organization, their fellow employees, and their immediate supervisors. B) give experienced employees a chance to learn new skills by rotating them through various jobs in the company. C) test new employees to determine where they should be assigned. D) help workers who have been laid off to find new jobs.
117)
Job rotation helps lower-level managers prepare for higher-level positions by
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A) letting them assume upper management positions for a limited time period. B) exposing them to different functions within the organization, thus giving them the broad perspective needed by top managers. C) helping them hone their highly specialized technical skills. D) giving them the opportunity to learn about every aspect of work performed in their department by spending a day doing the job of each person within the department.
118) With the advent of more sophisticated technology, employers who operate globally and want all employees to receive the same training may opt for A) apprenticeship programs. B) mentorship programs. C) job rotation programs. D) online training programs.
119)
Which statement about networking is the most accurate?
A) White males are much more aware of the importance of networking than women and minorities. B) Although African American and Hispanic managers are becoming aware of the importance of networking, there are no organizations available to help them make networking connections. C) Women have more difficulty forming networks than men because they can be barred from male-only clubs and social organizations where much of the networking occurs. D) Students can begin building network connections in college, even before they take on their first, full-time professional job.
120)
As companies continue to develop women and minorities for management positions, they
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A) increase the available talent pool of skilled employees. B) decrease chances for men to compete for professional positions. C) increase the morale of all employees. D) decrease the pay rate.
121)
It is good strategy to develop women and minorities for management positions because
A) it's a sure thing that the U.S. government will continue to pass laws that penalize companies even more for passing up women and minorities when it comes to promotion. B) women and minorities in management positions attract and serve other women and minorities better. C) it's less expensive to train these diverse groups. They do not demand as much in terms of travel and training time. D) these groups are less likely to change employers during their working years.
122) During the seminar, Nan took the opportunity to interact with production staff in other companies to build relationships that could benefit her own work in the future. What process did Nan use at the seminar? A) mentoring B) contingency planning C) networking D) apprenticeship
123) When Greta began her Ph.D. program, she was immediately assigned to a female __________ who would serve as a coach and guide and help Greta meet the right people who could enhance her career. Her program also required __________, where she would spend four to six weeks in different labs, gaining experience and exposure to a variety of research in her field of study.
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A) mentor; off-the-job training B) understudy; shadowing C) understudy; vestibule training D) mentor; job rotation
124) Corporate HR for Get Away Vacations knows that sexual harassment in the workplace is a serious issue. In order to provide consistency in its effort to train employees about sexual harassment, HR management created a(n) __________ program. Employees have a flexible time period when they can log on and receive exactly the same training as employees in all the firm’s locations. A) online training B) off-the-job training C) vestibule training D) simulation training
125) Marcus says he's working in his dream job. As an engineer for a major defense systems company, he is responsible for using sophisticated airplane and weaponry equipment that creates the exact conditions that one may experience using the equipment in a real-life situation. Marcus spends several hours each day performing A) vestibule training exercises. B) apprenticeship training exercises. C) distance training exercises. D) simulation training exercises.
126) At Quick Shot Running Shoes Inc., new workers are immediately assigned to jobs. They learn by doing the actual work after watching longer-term employees. This company uses a policy of
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A) vertical assimilation. B) on-the-job training. C) operational apprenticeships. D) vestibule training.
127) Kylee recently became a member of the Electricians Union. She has been told she will work with Jon, a skilled and experienced electrician, for at least three years in order to learn all of the skills and techniques of her craft. This type of training is referred to as A) skill replication. B) applied supervision. C) apprenticeship training. D) vestibule training.
128) Before Big Rig Truckers allows new employees to operate the large trucks and trailers it uses to transport goods, employees are sent to a nearby classroom where they learn the safe and proper way to work with all of the equipment they will use when they perform their jobs. Big Rig Truckers is using a training technique known as A) vestibule training. B) offline training. C) job replication. D) modular training.
129) Germaine, a control room engineer at Zap Power Inc.'s power plant, regularly practices handling emergency situations in a computerized mockup that duplicates the sights, sounds, and experiences of a real control room under emergency conditions. Zap Power uses __________ to train its engineers.
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A) time intensive training B) job replication C) vestibule training D) job simulation
130) Corporate management at Top Style Hotel Group believes Raegan has potential to move into a top management position within the organization. They are assigning Raegan to a different department every few months so she can obtain the broad perspective needed by top managers. This company is using __________ to develop Raegan’s management skills. A) job rotation B) multitasking C) understudying D) cross-functional management
131) Simone recently began working in an entry-level management position. She has already shown great promise, so the company has decided to groom her for an upper-level position. Trish, one of the more senior female managers in the company, has agreed to help Simone by introducing her to the right people, and providing her with the guidance and advice she needs to be successful within the firm. Trish is acting as Simone’s A) mentor. B) assimilation assistant. C) transfer agent. D) network captain.
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132) If you aspire to become a sous chef, you will pursue several types of training and development. Your __________ will include how to perform as a line chef, as you work your way through pastry, grill, pantry, and sauté. As a(n) __________, you will work alongside another sous chef for a few years in order to learn how to juggle all the middle-management type of activities expected of this professional. Your __________ training will be extensive, as you go to culinary school, attend a community college, and/or take management classes to help you learn to minimize conflict in the kitchen as well as improve the productivity of those you manage. A) apprenticeship; understudy; online B) apprenticeship; simulator; off-the-job C) job rotation; apprentice; off-the-job D) on-the-job training; understudy; vestibule
133) The __________ is an evaluation of the performance level of employees against established standards to make decisions about promotions, compensation, additional training, or firing. A) job analysis B) performance appraisal C) mission statement D) objective analysis
134)
The first step in the performance appraisal process is to A) perform a human resource inventory. B) establish performance standards. C) analyze the jobs to see what tasks must be performed. D) meet with employees and discuss the overall objectives of the firm.
135)
The last step in performance appraisal is to
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A) talk to the employee being appraised. B) evaluate the employee's performance. C) take any corrective action that the appraisal indicates is necessary. D) use the results to make decisions about compensation, promotions, and additional training.
136) A newer form of performance appraisal is called the __________ because it encourages feedback from everyone working around the employee including those who report to the employee. A) 360-degree review B) roundabout assessment C) environmental review D) multilevel assessment
137)
The purpose of a performance appraisal is to
A) protect the firm from lawsuits by disgruntled employees. B) improve employee performance. C) obtain information for the firm's financial performance that must be provided in the annual report to stockholders. D) give managers the information they need to determine the firm's strengths and weaknesses relative to its most serious competitors.
138)
The information contained in performance appraisals helps managers A) write job descriptions. B) compute the firm's overall performance in terms of a rate of return on investment. C) evaluate job applicants. D) make decisions about promotions, compensation, training, and firing.
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139)
Unlike a traditional performance appraisal, a 360-degree review A) is performed by experts from outside the organization. B) provides feedback from all around the employee, including employees at lower
levels. C) uses only objective measures of performance. D) compares the performance of each worker to every other worker.
140)
Which statement about performance appraisals is the most accurate?
A) The most difficult step of a performance appraisal is almost always the actual evaluation of the employee's performance. B) Performance standards do not have to be measurable in order to be effective. C) The discussion of the results of a performance evaluation with an employee should allow the employee an opportunity to make suggestions about how to improve on current procedures. D) Most employees have a good understanding of the standards they are expected to meet, even if their managers do not explicitly communicate these standards.
141) A department manager evaluated the performance of her employees as part of a performance appraisal process. If she follows the six-step appraisal process, the next step is A) meet with employees to discuss the results. B) write up a performance review report and submit it to top management. C) adjust the standards based on how well the employees did. D) make decisions about training, promotions, and pay raises.
142) The management team at Schiller Holdings want to make sure their decisions about compensation, promotions, and firings are based on sound information that meets legal requirements. One way for the company to achieve this objective would be to
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A) outsource all such decisions to an outside expert. B) establish an effective performance appraisal system. C) make sure that these decisions are not influenced by the employee's immediate supervisor. D) base all pay, promotion, and firing decisions on the Hay system.
143) Benjamin dislikes conducting performance appraisals with his employees because he always finds it to be a struggle. In order to make the actual performance evaluations a better experience for all, Benjamin should A) base his evaluation on a written test. B) use a democratic approach and let the employees evaluate each other. C) set performance standards that are reasonable, understandable, and measurable, then clearly communicate these standards to his team. D) use the principle of motion economy to break down each employee’s job into a series of steps that can be easily evaluated and compared to ideal performance standards.
144) Managers at MidTown Financial get a performance appraisal once a year. MidTown uses an evaluation process that provides feedback about performance not only from superiors but also from subordinates and other managers at the same level. This type of evaluation is known as a(n) A) organization-wide appraisal. B) 360-degree review. C) circular analysis. D) multilevel assessment.
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145) As a project manager for a large construction company, Kyle decided to make the performance appraisal process as painless as possible for his crew. He spent a considerable amount of time creating performance standards he felt were reasonable, and after six months' time, he scheduled individual appointments with each worker to discuss strengths and weaknesses and areas that needed improvement according to the standards he privately set. Some employees were sent to vestibule training, and one even got a promotion with additional compensation. What did he fail to do correctly? A) Provide a pleasant environment for the appraisal such as a restaurant setting. B) Dismiss at least 10 percent of the work crew. C) Copy the HR department on all the results, within 24 hours of each appraisal. D) Communicate the performance standards to the employees so they know what is expected.
146) For many types of service organizations such as hospitals, hotels, and airlines, the primary cost of operations is A) establishing and maintaining a presence on the Internet. B) insurance and legal expenses. C) coping with obsolescence that results from the rapid pace of technological change. D) compensation of labor.
147) Workers who are paid a __________ receive a fixed compensation weekly, biweekly, or monthly. A) commission B) salary C) piece rate D) royalty
148)
Salespeople often are paid a __________ based on a percentage of their sales.
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A) commission B) salary C) royalty D) piece rate
149)
Workers who punch a time clock typically are paid a(n) A) commission. B) salary. C) hourly wage. D) bonus.
150) The __________ method is a pay system that is based on job tiers, with each tier having a strict pay range. A) Steiner B) Gantt C) Hay D) Gilbreth
151)
The two most common compensation methods for teams are A) cash bonuses and cashless bonuses. B) skill-based pay and gainsharing. C) piecework pay and commissions. D) salaries and capital gains.
152) Although the skills learned do not always translate into profits for the company, __________ pay rewards the growth of both the individual and team participation.
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A) skill-based B) gainsharing C) commission D) stock option
153) A common way of compensating teams is a __________ system, in which bonuses are based on improvements over a previous performance baseline. A) commission B) stock option C) gainsharing D) skill-based
154) Sick-leave pay, vacation pay, pension plans, and health plans that provide additional compensation to employees are called A) fringe benefits. B) off-schedule salary. C) bonus sharing. D) nonmonetary salaries.
155)
Today, fringe benefits account for more than __________ percent of total payroll costs. A) 6 B) 18 C) 24 D) 30
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156) Many firms now offer their employees __________ benefits, such as on-site haircuts and concierge service, which help employees maintain a balance between work and family life. A) real-time B) situational C) break time D) soft
157) A fringe benefit plan where employees choose the package of benefits they want up to a certain dollar amount is called a __________ plan. A) cafeteria-style B) variable lifestyle C) 401K D) flexible spending
158)
A major advantage of a piecework pay system is that it A) creates a powerful incentive to work efficiently. B) requires a minimum of paperwork and record keeping. C) encourages cooperation and teamwork among employees. D) is a system that is strongly supported by both unions and management.
159)
Which statement about team pay is the most accurate?
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A) Most managers are very satisfied with the team-based pay programs that are currently in place. B) Most managers have concluded that team pay methods are so complex and difficult to administer that they have gone back to pay plans based on rewarding workers for their individual achievements. C) Although individuals who make an outstanding contribution should be recognized and rewarded, a pay system based strictly on individual performance can undermine the cohesiveness teams need to meet their goals. D) Team pay plans should emphasize individual rewards since the team can succeed only if all individuals are highly motivated to work as hard as possible.
160)
When workers are a part of a team their compensation should be
A) based strictly on their individual performance in order to encourage each worker to exert his or her maximum effort. B) based strictly on the achievements of their team in order to encourage teamwork and cooperation. C) a stated wage or salary that is not based on either team or individual performance, because it is very difficult to measure individual performance in a team environment. D) based on team performance, with additional rewards for those workers who make outstanding individual contributions.
161)
Companies place a considerable amount of attention on compensation plans because
A) firms are likely to face stiff penalties from the government if they do not offer competitive wages and salaries. B) attracting the right employees with good compensation packages can translate into a competitive advantage. C) it is a hygiene factor. D) a good compensation plan will be less costly than other parts of the operation.
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162) The most likely reason a firm would pay its sales representatives a commission rather than a salary is that it wants to A) provide sales representatives with a strong incentive to generate more sales for the company. B) keep the pay system as simple as possible. C) be able to deduct the cost of compensating the sales representatives from its taxable income. D) give the sales representatives a stronger incentive to collaborate with each other and act as a team.
163) According to the box “Keeping Your Global Workforce Happy,” which statement about working with employees from different countries is most accurate? A) The increasingly global nature of markets and the impact of television, movies, and the Internet on people's attitudes and perceptions have largely eliminated cultural differences between foreign and domestic workers. B) Currency rate differences and different laws with respect to fringe benefits, such as health insurance and time off, create challenges for HR management. C) U.S. laws require American firms to hire, train, and pay employees in other countries the same way their U.S. employees are hired, trained, and paid. D) More often than not, American firms have found that cultural differences in other nations are so great that it is more efficient to staff key positions in foreign facilities with American workers rather than hire foreign workers.
164) Human resource managers at McMillan Industries want to encourage teamwork and are looking for a better way to compensate members of teams. One approach they are considering is a skill-based system. Which statement about this type of pay system is most accurate?
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A) Skill-based systems are unlikely to work with teams because they are designed to encourage individual initiative rather than teamwork. B) A skill-based system is a very effective way to pay teams because this approach makes it easy to correlate skill acquisition with the bottom-line gains of the company. C) A skill-based pay system works well in many cases, but employees tend to resist this approach since it affects only bonuses, which are not guaranteed, rather than base pay. D) Team members have base salaries, but they are additionally compensated according to the number of new skills they acquire as a team.
165) Tomas recently earned his real estate license in Tennessee and has interviewed with several groups to find a job. All have told him that his income will be based on a percentage of his real estate sales for the month. Tomas will be paid A) a monthly salary. B) a piece rate. C) on a commission basis. D) through a profit-sharing plan.
166) Mike is a supervisor at a small manufacturing plant. His pay starts at $635 per week. Mike is paid on a(n) A) salary pay system. B) commission pay plan. C) rolling rate system. D) income averaging plan.
167) Karen works for Target Electronics, a sophisticated electronic equipment company. Karen is happy to see that the value of company stock has reached $53 per share, because certain employees (including herself) have the opportunity to buy a given number of shares of its stock for $25 per share for the next year regardless of how high the market price goes. Target Electronics is offering some employees a
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A) stock annuity plan. B) stock reinvestment plan. C) stock dividend. D) stock option plan.
168) This year, Core Accountants Inc. implemented a new benefits system that gives employees the flexibility to choose among different benefit options, as long as the total cost of the benefits does not exceed a certain dollar amount. The type of benefits package offered to Core Accountants employees is a(n) A) flexiplan. B) cafeteria-style fringe benefits plan. C) democratic benefits package. D) open options benefits plan.
169) Sabrina has reached an executive-level position with her company, with a salary upward of $200,000. Recently a competitor firm approached her offering her $15,000 less in salary, but the job would come with an upgraded car, memberships in two country clubs of her choice, an additional two weeks paid vacation with use of the company's villa in Jamaica, and paid financial counseling. With respect to compensation, Sabrina A) will not consider this offer because it is not worth $15k less in salary, and it would impact her ability for future offers. B) may consider this offer because it is not just about compensation, it is about the job content. C) will not consider this offer because it lacks soft benefits. D) may consider this offer because accepting fringe benefits instead of a higher salary may positively impact her tax consequences.
170) A __________ plan gives employees some ability to adjust hours when they work, as long as they work the required number of hours.
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A) cafeteria-style B) flextime C) varitime D) Gantt scheduling
171)
The time when all employees must be present in a flextime plan is referred to as A) compressed time. B) shared time. C) core time. D) company time.
172)
A __________ allows workers to work the full number of hours per week in fewer days. A) flextime plan B) compressed workweek C) maximum plan D) double shift plan
173)
A disadvantage of flextime plans is that they often A) confuse workers. B) lead to a higher level of absenteeism. C) cause worker morale to decline. D) require supervisors and managers to work longer hours.
174)
In a __________ arrangement two part-time employees fill one full-time job.
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A) job enlargement B) multitasking C) job sharing D) split shift
175)
A characteristic of a compressed workweek is that
A) workers receive the same pay for fewer hours of work. B) the pace of work is increased so that workers perform the same amount of work in fewer hours. C) employees work fewer days each week, but work more hours each workday. D) two or more part-time workers are hired to fill each full-time position.
176)
Which statement about home-based work is most accurate?
A) Although home-based work may become very popular in the future, only a small percentage of workers currently work at home on a regular basis. B) Home-based work offers big advantages for many workers, but is likely to increase costs for employers significantly. C) Home-based work tends to increase the productivity of almost all workers, since people tend to be more productive when they are comfortable and can work flexible hours. D) Home-based work allows workers to choose their own hours and interrupt work for childcare and other tasks, but this freedom and flexibility can create problems for some workers.
177) Annette and Nathan teach the kindergarten class at Wood Grove Elementary. Annette teaches on Monday, Wednesday, and Friday while Nathan teaches on Tuesday and Thursday. They both like this arrangement as it allows them time to help out with elderly parents when they are not teaching. What type of work arrangement does this represent?
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A) flextime B) job rotation C) networking D) job sharing
178) At Prestige Dental Group, Marta works daily as an administrative assistant from 9:00 a.m. until 1:00 p.m., when she is replaced by Sonja who works from 1:00 until 5:00 p.m. The arrangement Marta and Sonja have at the dental practice is known as A) job enlargement. B) job sharing. C) job rotation. D) job allocation.
179) At Willow Financial Consulting, employees are allowed to choose what time they start each workday, as long as they arrive between the hours of 7:00 a.m. and 10:00 a.m. They must be on the job from 10:00 a.m. until noon and from 1:00 p.m. until 3:00 p.m. They are required to work a total of 8 hours each day, so the earlier they arrive, the earlier they can leave. This is a __________ system. A) job sharing B) job enlargement C) flextime D) compressed work week
180) Desmond Communications uses a flextime plan; however, all employees must be on the job from 10:00 a.m. until 2:00 p.m. What are these hours called?
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A) core time B) mandatory attendance time C) shared facilities time D) compressed time
181) R&L Electronic stores across the United States have gone to a __________, where management works four 10-hour days, and has four days off. A) flextime system B) compressed work week C) job rotation system D) constrained work week
182) Triangle Percussion Company tried to implement a flextime system. However, after only a few months, they abandoned the new system. What is the most likely reason Triangle would drop its flextime plan? A) It caused an increase in traffic congestion. B) It often made communication among employees more difficult. C) The employees resented being required to come to work early or stay late. D) Workers tend to be less productive when they have to work longer hours in a single day.
183) Bob is an office manager with a financial company. His company recently announced that it will soon implement a flextime plan. Under this new system, Bob is likely to find that A) he will have to work longer hours. B) workers tend to forget their work schedules. C) almost all of his workers decide to change to an earlier schedule. D) he will have to work harder to maintain high morale among the employees in his office.
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184) Samuel works in purchasing for Greener Foods Group on the East Coast. He arrives at work at 6:00 a.m. and leaves by 3:00 p.m. He enjoys this schedule because he is an early riser. A disadvantage to the company in allowing Samuel to use flextime is A) morning workers are never as productive as afternoon workers. B) there is a very limited window to talk with employees on the West Coast, who work 8:00 a.m. to 5:00 p.m. C) this system will increase absenteeism. D) the company is required to hire twice as many people and spend additional funds training these individuals.
185) Stephanie spends three hours each day working as an online customer service representative for a retailer. She can choose her own hours, within reason. The job works out well for her since she has a new baby that she cares for much of the day. The retailer does not provide her or the other 200 customer service reps with workspace, which constitutes a sizeable cost savings for the company. Stephanie participates in A) home-based work. B) time-in work. C) job sharing. D) compressed work.
186) Two advantages of using __________ to fill open positions are: (1) it improves the morale of current employees, and (2) the person filling the position is already familiar with the organization's culture and procedures. A) unskilled workers B) apprenticed workers C) promotions from within D) external sources
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187)
One implication of today's flatter corporate structures is that A) employees are more likely to get a lateral transfer, before a promotion. B) firms are becoming less interested in hiring contingent workers. C) a greater number of workers are now classified as middle managers. D) workers are expecting more of their pay in the form of stock options.
188)
If a firm wants to know why valuable employees are leaving the company, it will conduct A) performance appraisals. B) job inventories. C) job simulations. D) exit interviews.
189) The __________ doctrine states that employers have as much right to fire workers as the workers have to leave the company voluntarily. A) first-in, first-out B) employment at will C) reciprocal employment D) mutual consent
190) A(n) __________ is a financial incentive a firm offers to encourage employees to accept an early retirement offer. A) ESOP B) flextime agreement C) golden handshake D) silver lining
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191)
A reason workers tend to receive fewer promotions than in the past is that
A) most firms now believe hiring people outside the organization is a better way to fill management positions because it brings in new blood. B) the movement toward flatter organizational structures provides fewer opportunities to move upward. C) firms have found that promoting employees can create jealousy and resentment among the workers who are not promoted. D) very few of today's supervisors and lower-level managers have the qualifications needed to move into higher management positions.
192)
Which statement about early retirement is most accurate?
A) Traditional early retirement plans are no longer legal because they represent age discrimination. B) An advantage of early retirement as a method of downsizing is that early retirement provides opportunities for younger employees to be promoted. C) Federal law requires firms to offer early retirement benefits to any worker who voluntarily offers to retire before the age of 60. D) Workers who receive an offer for early retirement are likely to gain by refusing the firm's first offer and holding out for a better deal.
193) One of the reasons many firms have chosen to use temporary employees rather than rehire full-time employees is that A) the government provides strong tax incentives to hire temporary workers. B) such workers usually are more loyal to the firm. C) most labor laws only apply to full-time workers, so there are fewer legal hassles associated with hiring temporary workers. D) it enables them to avoid the prohibitively high costs associated with terminating employees.
194)
A firm would implement a policy of holding exit interviews if it wanted to
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A) find out why good employees were quitting. B) implement a golden handshake policy. C) allow immediate supervisors one more chance to convince retiring workers to stay on the job. D) make sure workers who agreed to work from home understood their new responsibilities.
195) William has 30 years of service as a manager for his company. He remembers when managers had almost complete freedom to fire workers. William thinks this is only fair. "After all," William points out, "workers quit whenever they get a better offer. Shouldn't managers have as much freedom to fire workers as the workers have to quit?" William’s comments suggest that he believes in the doctrine of A) bonded employment. B) reciprocated employment. C) employment by mutual consent. D) employment at will.
196) The Storme Corporation wants to downsize but is concerned about the impact it will have on its remaining employees. One policy that might allow Storme to reduce its labor force without adversely affecting morale is to A) develop an affirmative action plan. B) offer early retirement benefits. C) implement a job-sharing program. D) make more extensive use of job rotation.
197) While talking with a group of family and friends, Salena mentions that she was offered an impressive golden handshake by her employer. Which statement is she most likely to make next?
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A) "That will teach those guys to discriminate against me." B) "It's great to work for a company that encourages employees to further their education." C) "I've already looked into using some of the money to go on a trip to Europe when I retire." D) "Of course, I would have really preferred to receive money, but just knowing that top executives will take the time to recognize my accomplishments, makes me feel better about my work."
198) Misty worked in the student bookstore at her college. Although she liked the retail atmosphere, there was little opportunity for advancement because the three persons in management positions were doing well in their jobs and not planning to retire very soon. When the college opened a new branch, Misty seized the opportunity to be reassigned to the new location and manage the smaller operation. Her change was not a promotion, it was considered a(n) __________; however, it served to improve her morale because she was performing more tasks and had greater responsibility than at the previous bookstore. A) advancement B) vertical move C) forward shift D) lateral transfer
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199) Dee Pozitt had been the assistant HR director at Fleesum Financial Services for a bit more than a year when the company's HR director was injured in a sky-diving accident. Because of his injuries the director would be unable to work for several months. Howie Fleesum, the company's CEO, decided to name Dee the acting director of human resources. Though she had been at the firm for a shorter period of time than most other managers, he felt that her position as the director's assistant had given her insights into the company's human resource issues that the other managers lacked. He also was very impressed by the glowing performance appraisal Dee recently received from the director, her peers, and even subordinates. Before accepting the position as acting director, Dee made sure that Mr. Fleesum recognized her authority to implement some major changes in policies she and the director had been planning before his accident. The changes were intended to make the company more responsive to the needs of employees, thus improving morale and reducing worker turnover. Although Dee was sorry the director was injured, she was pleased that Mr. Fleesum had confidence in her and was willing to give her the authority to implement important new programs. The only aspect of her opportunity that worried her was the resentment and hostility she sensed from a few of the older, more experienced managers. One of the most hostile coworkers was a fellow named Mort Gage. Dee decided she had better talk to Mort and find out why he was so upset.
199.1) Before the director's accident, Dee had worked with him to devise a plan that would allow each employee to select the fringe benefits he or she wants up to a certain dollar amount. The type of plan Dee and the director developed is known as a(n) A) cafeteria-style fringe benefits plan. B) benefits buffet. C) open options plan. D) flexible spending plan.
199.2) Dee wants to give Fleesum's employees more freedom to schedule when they begin and end their workdays. Her plan still requires employees to work eight hours per day, but allows them to start as early as 7:00 a.m. or as late as 9:00 a.m., and leave as early as 4:00 p.m. or as late as 6:00 p.m. Her plan also requires all workers to be on the job between 9:00 a.m. and noon, and between 2:00 p.m. and 4:00 p.m. The type of plan Dee wants to implement is known as a
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A) compressed workday. B) flextime plan. C) personal time frame plan. D) block scheduling plan.
199.3) Dee's performance appraisal allowed the director to evaluate her performance, but also allowed peers and subordinates to provide feedback as well. This type of appraisal is called a(n) A) vertical appraisal. B) horizontal appraisal. C) global review. D) 360-degree review.
199.4) Fleesum recently began using cross-functional teams. Dee wants to make sure the teams collaborate effectively, but also wants to avoid stifling individual initiative. One method she could use to achieve this goal would be to A) use a more autocratic management style. B) use a skill-based pay plan for the teams. C) base the compensation of team members on a commission rather than a salary. D) implement a job-sharing plan for team members.
200) Human resource management is the process of deciding the number and types of employees your business needs, and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals. ⊚ true ⊚ false
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201) One reason human resource management has grown is that the shift from traditional manufacturing industries to service and high-tech manufacturing industries requires workers to have highly technical job skills. ⊚ true ⊚ false
202)
Recruiting is relatively easy today because qualified labor is so plentiful. ⊚ true ⊚ false
203) Today, human resource management is viewed as a clerical function of keeping personnel records and processing payroll. ⊚ true ⊚ false
204) The human resource function has become so critical that it is now a concern of all managers. ⊚ true ⊚ false
205) The human resource manager's job is easier today than it was in the past because a growing percentage of the workforce is highly educated and well-prepared for jobs in the contemporary business environment. ⊚ true ⊚ false
206)
In the past, human resources were scarce, but today qualified employees are plentiful. ⊚ true ⊚ false
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207) One of the challenges facing today's human resource managers is a shift in the age distribution of the labor force, including aging baby boomers, many of whom are delaying retirement. ⊚ true ⊚ false
208)
Today's workers have an increased demand for benefits tailored to their individual needs. ⊚ true ⊚ false
209)
Today's workers place a lower priority on leisure time than they did in the past. ⊚ true ⊚ false
210) One challenge faced by today's human resource managers is that workers overseas often work for lower wages and are subject to fewer laws and regulations. ⊚ true ⊚ false
211)
Today's workers demonstrate a decreased sense of loyalty. ⊚ true ⊚ false
212) Underemployed workers present a challenge for human resources managers. These are people who are working in jobs they are not trained for. ⊚ true ⊚ false
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213) The appropriate term for an employee whose skills and knowledge go beyond their current work responsibilities is underemployed worker. ⊚ true ⊚ false
214) The job market has a large number of underemployed workers in part as the result of declining industries, such as the automobile industry. ⊚ true ⊚ false
215) As more and more Baby Boomers reach retirement age, companies have to plan for transferring knowledge to younger workers. ⊚ true ⊚ false
216) The growing importance of human resource issues has led most firms to expect only their human resource specialists to tackle HR issues. ⊚ true ⊚ false
217) HR is focused on issues directly related to a person's job and with things that happen at work, as opposed to concerns that may affect one's work such as eldercare and childcare, but are not directly related to work. ⊚ true ⊚ false
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218) Geo-Robotics International is a rapidly-growing firm specializing in the production of sophisticated robots for industry maintenance tasks. One of the major problems Geo-Robotics is likely to face is a shortage of qualified workers. ⊚ true ⊚ false
219) Janelle works as a manager in the accounting department for a service company. If her company is like most contemporary firms, Janelle will leave almost all aspects of human resource functions to specialists in the human resource department. ⊚ true ⊚ false
220) Curtis was a skilled welder at an auto plant. He lost his job and has been looking for work for several months. He finally accepted a job as an unskilled laborer at a local nursery. Although happy to be back to work, he feels that his new job doesn't use his skills to their full potential. Curtis is an example of an underemployed worker. ⊚ true ⊚ false
221) In just one year, Monica developed gall bladder problems and needed surgery; she became a single parent; she moved her mom in to live with her in order to avoid placing her in a nursing home; and she unexpectedly tore her rotator cuff playing softball. Generally, these are not considered circumstances that impact job performance because they fall outside of the workplace. HR managers need only be concerned with how Monica performs when she is at work. ⊚ true ⊚ false
222)
The federal government has minimized its role in human resource management. ⊚ true ⊚ false
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223) In 2020, the Supreme Court broadened Title VII protections to include sexual orientation and gender identity. ⊚ true ⊚ false
224) Congress has given the Equal Employment Opportunity Commission broad powers to issue guidelines for acceptable employer behavior concerning employment opportunities. ⊚ true ⊚ false
225) The effectiveness of the EEOC has been limited because Congress never gave it any authority to enforce its mandates. ⊚ true ⊚ false
226) Affirmative action programs created more government food assistance programs for the poor. ⊚ true ⊚ false
227)
The Civil Rights Act of 1964 underwent extensive change before its final passage. ⊚ true ⊚ false
228) The Civil Rights Act of 1991 gave victims of discrimination the right to seek punitive damages from the firms that discriminated against them.
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true false
229) Recent federal law clearly and strongly supports the notion that companies must use strict employment quotas to correct for past discriminatory actions. ⊚ true ⊚ false
230) The concept of "reasonable accommodations" means that all workers should be treated in the same manner. ⊚ true ⊚ false
231) Most firms have trouble implementing the structural changes required by the Americans with Disabilities Act. ⊚ true ⊚ false
232) The ADA requirement of “reasonable accommodation” means companies should treat people according to their specific needs. ⊚ true ⊚ false
233) The Age Discrimination in Employment Act only prevents discrimination against employees who are over the age of 65. ⊚ true ⊚ false
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234) The Age Discrimination in Employment Act permits age limits in professions where it can be established that ability to perform the job declines significantly with age. ⊚ true ⊚ false
235)
The Civil Rights Act of 1964 breezed through Congress and hasn’t been amended since. ⊚ true ⊚ false
236) When it comes to human resource management issues, the federal government generally has taken a "hands off" approach since the early 1960s. ⊚ true ⊚ false
237) The Americans with Disabilities Act protects people who are born with physical disabilities, exclusively, but not those who acquire disabilities later in life. ⊚ true ⊚ false
238) The Americans with Disabilities Act protects qualified persons from discriminatory hiring practices, but does not require employers to provide suitable accommodations in the workplace, or opportunities for promotion. This is left to occupational safety laws. ⊚ true ⊚ false
239) Jen is a manager who takes great pride in her ability to be fair and impartial. She ensures she treats all workers the same way and evaluates them all using the same standards. Jen is likely to adjust easily to accommodate disabled workers. ⊚ true ⊚ false
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240) Grant, in his late fifties, loves his work as a bus driver in Chicago and wants to continue working for many more years. The Age Discrimination in Employment Act provides Grant with the right to keep his job as long as his company is financially sound and he does not commit a felony. ⊚ true ⊚ false
241) Michael is a worker at a large discount retailer and his husband works at a national bank with several branches. They recently adopted a child and agreed that each would take six weeks of leave from work in order to care for their child. According to the Family and Medical Leave Act, one, but not both, are eligible for leave. ⊚ true ⊚ false
242) Hammond Enterprises hired qualified soldiers with hearing impairment to work at its headquarters in Dallas. As a growing business, it is abiding by the law as currently stated. It is not required to adapt the worksite to help these soldiers hear and communicate better with each other. ⊚ true ⊚ false
243) Trent and Tia work at a prominent high-tech company. Trent sustained injuries while recently serving in the Army Reserves. Upon his return, the company provided him and other returning service members with ergonomic desks and chairs that accommodate wheelchairs and other needs. Although Tia is hearing impaired, the company does not need to consider providing her with a headset that magnifies sound because she is the only employee out of 200 requiring this accommodation. ⊚ true ⊚ false
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244) Erica is a recent HR hire for a security firm. Her supervisor was impressed with Erica’s knowledge of current laws with respect to hiring practices but asked her to quickly get up to speed on compensation and training laws. This is a reasonable request if Erica plans to stay in the HR field. ⊚ true ⊚ false
245)
Like all management, human resource management begins with planning. ⊚ true ⊚ false
246) The first step in the human resource planning process is to specify the objectives of each job within the firm. ⊚ true ⊚ false
247) One purpose of a human resource inventory is to determine whether the labor force is technically up-to-date and well trained. ⊚ true ⊚ false
248)
The result of a job analysis is a written document called a human resource inventory. ⊚ true ⊚ false
249) When you collect information about a particular job title, including how the job is performed and what it takes to perform the job, you are conducting a job analysis.
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true false
250) A job analysis allows human resources to create a job description and job specifications for positions within the firm. ⊚ true ⊚ false
251) A job specification is a statement of the job itself, while a job description is a statement about the person who does the job. ⊚ true ⊚ false
252) A job specification identifies the minimum qualifications a person must have to fill a particular job. ⊚ true ⊚ false
253) A job description identifies and describes the type of person who should perform the job, including important qualifications such as deduction, skills, and experience. ⊚ true ⊚ false
254) Human resource planning involves the assessment of both the future demand and the future supply of the various types of labor needed by the organization. ⊚ true ⊚ false
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255) The first four steps in human resource planning all lead to the final step, which is the development of a strategic human resource plan. ⊚ true ⊚ false
256) The second step in human resource planning consists of conducting job analyses. Through observation and research, the manager will collect information on the kinds of things that each job title performs and how they are performed, as well as the skill and knowledge requirements for doing the job. ⊚ true ⊚ false
257) Job analysis helps a manager answer the question: "How many workers in my organization have this particular skill?" ⊚ true ⊚ false
258) Essentially, the steps of the human resource plan require the HR professional to (1) take inventory of the type of workers (including the skills of the workers) that the business already has, in order to determine if it has the most up-to-date workforce for its needs; the HR professional then proceeds with (2) analyzing each job; (3) forecasting the firm's requirements for various job titles; and (4) making a determination of the future supply of skilled labor available to meet the demands of the business. Lastly, the HR professional (5) develops a human resource strategic plan. ⊚ true ⊚ false
259) Kent, a human resource manager with the Write-Way Group, just finished creating a document that describes what proofreaders do at their jobs. The study Kent completed is known as a human resource inventory. ⊚ true ⊚ false
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260) Marietta wants to know how many workers in her company have certain specialized skills and have received training to update their qualifications within the past year. She could use a human resource inventory to help her find this type of information. ⊚ true ⊚ false
261) Cora, an HR manager for a medium-sized company, is assigned to update all job descriptions and job specifications for her company. She should begin by collecting information about each job title, as well as about the kinds of activities and responsibilities that go with each job. After she thoroughly analyzes a job, she will write the job description and job specifications for that job. ⊚ true ⊚ false
262) Dana is interested in transferring to a new position recently opened in the finance area of her company. But first, she wants to find out more about the type of work and responsibilities involved in the job. A document that would have the information she wants is the job specification. ⊚ true ⊚ false
263) CareerBuilder.com has posted a variety of sales management positions. Some require the manager to have five to ten years of experience and preferably a master's degree in a field of science. These requirements are part of the job specification. ⊚ true ⊚ false
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264) The Administrative Assistant II position at Big Tread Bikes Inc. performs word processing and spreadsheet development for two executives, and other clerical duties as needed. Other job responsibilities include maintaining the office operations budget, coordinating travel, and supervising two Administrative Assistant I positions. These tasks are part of the job description for this position. ⊚ true ⊚ false
265) Alyce is an HR manager for a firm that is switching to a more sophisticated production method. One of Alyce’s duties during the planning process will be to forecast the demand for the type of labor needed to implement the new method. ⊚ true ⊚ false
266) Recruitment is a set of activities undertaken for attracting qualified people, at the right time. ⊚ true ⊚ false
267) Because of the continuous flow of potential employees into the labor market, recruiting usually is the easiest task for a human resource manager to accomplish. ⊚ true ⊚ false
268) Union rules and company policies make the recruitment process easier because they provide guidelines. ⊚ true ⊚ false
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269) When recruiting, human resource managers must attract people who not only have the right skills, but also fit in with the corporate culture and work well under the company's leadership style. ⊚ true ⊚ false
270)
Small businesses usually find recruitment easier than large firms. ⊚ true ⊚ false
271)
An advantage of hiring from within is that it improves employee morale. ⊚ true ⊚ false
272)
External recruitment sources are usually cheaper to use than internal sources. ⊚ true ⊚ false
273) Transfers and promotions are internal sources used by human resource managers to fill recruiting needs. ⊚ true ⊚ false
274) Public and private employment agencies and college placement offices are internal sources used by human resource managers when they are recruiting employees. ⊚ true ⊚ false
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275) When recruiting employees, human resource managers focus primarily on the skills and training of the people they are recruiting, and work on determining "fit" after the hiring process has occurred. ⊚ true ⊚ false
276) Advertisements in trade journals, private and public employment agencies, college placement offices, and trade associations are internal sources for recruitment. ⊚ true ⊚ false
277)
Temporary help services, job fairs, and social media are external sources for recruitment. ⊚ true ⊚ false
278) Brittany decided to promote her assistant to the open supervisory role instead of searching for a new employee outside the organization. She relied on an internal source to fill the position. ⊚ true ⊚ false
279) Mahut, the HR manager at a medium-sized corporation, understands the value of hiring from within to fill positions whenever possible. This means that he relies extensively on promotions, transfers, and recommendations from current employees to find qualified employees. ⊚ true ⊚ false
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280) As the HR manager at a small business, Jeremy handles most of his firm's recruiting efforts. Because Jeremy recruits for a small business, he has a distinct advantage over larger competitor firms when it comes to finding the right people to fill his firm's needs. ⊚ true ⊚ false
281) The Pure Fruit Yogurt Company is about to diversify into an entirely new market— quinoa bowls. This move will create the need for several new positions in the production and marketing departments. Since the production technologies and the marketing environment in this new market are very different than in the company’s traditional market, it is likely to rely on external sources to fill many of the positions created by its diversification. ⊚ true ⊚ false
282) Selection is the process of gathering information and deciding who should be hired, under legal guidelines, for the best interests of the individual and the organization. ⊚ true ⊚ false
283) The cost of recruiting, processing, and training a new entry-level employee is significant, and sometimes exceeds the annual salary earned by the employee. ⊚ true ⊚ false
284)
The amount most businesses spend on selecting and training workers is relatively low. ⊚ true ⊚ false
285) Because current legal guidelines limit the types of questions that can be asked, completed job application forms contain very little useful information about job candidates.
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286)
true false
Job applications can ask about educational background and past job experience. ⊚ true ⊚ false
287) Staff members from the human resource department seldom take part in initial screening interviews, but often participate in the follow-up interviews of top job candidates. ⊚ true ⊚ false
288) During an interview, a manager should be careful not to ask the applicant about his or her family or other non-job-related questions, like childcare plans. ⊚ true ⊚ false
289) Trial periods are an effective method of determining whether a candidate is of value to the company. ⊚ true ⊚ false
290) Most firms today are checking the backgrounds of job applicants more carefully than they did in the past. ⊚ true ⊚ false
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291) Services now exist that allow firms to perform quick background checks of potential employees. ⊚ true ⊚ false
292) Employment tests should focus on general social skills rather than skills that are related directly to the job. ⊚ true ⊚ false
293) Though controversial, it is not uncommon for companies today to test their employees and job applicants for drug use. ⊚ true ⊚ false
294) Part-time workers, seasonal workers, and independent contractors are all examples of contingent workers. ⊚ true ⊚ false
295) The most common reason for hiring contingent workers is that they typically work from home. ⊚ true ⊚ false
296) Though temporary workers are employed in most sectors of the economy, almost none have been hired to fill manufacturing jobs. ⊚ true ⊚ false
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297) It is not unusual to find persons with a variety of skills and skill levels serving as contingent workers. Contingent workers in the United States are usually under 25 years of age and may include independent contractors, interns, and even college students who only want to work during the summer months. ⊚ true ⊚ false
298) All states in theUnited States require pre-employment physical exams for select groups of applicants. ⊚ true ⊚ false
299) According to the box “Connecting Through Social Media,” your online profile on sites like Twitter, Instagram, Facebook, and LinkedIn will have little to do with whether or not you are selected for a job. ⊚ true ⊚ false
300) Daveed is designing a new job application form for his firm. The questions Daveed includes on the new form should avoid broad questions about the applicant's beliefs, culture, and family background. Instead, it should focus on factors such as the applicant's work experience, education, and career objectives. ⊚ true ⊚ false
301) As the HR manager, Denise is very concerned about the high cost of labor turnover. One good way for her firm to eliminate high turnover costs is to establish a policy of hiring contingent workers.
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true false
302) Kelley secured an internship with a financial services firm for the summer. Although she will be working full-time during the program, she is still considered a contingent worker. ⊚ true ⊚ false
303) Top Trainers wants to expand its services into new markets, but to remain competitive it needs to keep its costs low. If it is like most firms, one way Top Trainers can save a lot of money is by reducing the time and effort it devotes to the selection of employees. ⊚ true ⊚ false
304) Organic Farm Group Inc. needs more workers during harvest time than at other times of the year. Hiring contingent workers could be an efficient way for the company to meet its temporary employment needs. ⊚ true ⊚ false
305) Employee training focuses on short-term skills, while employee development focuses on long-term abilities. ⊚ true ⊚ false
306) Besides increasing productivity, a good training program can increase a firm's retention rates. ⊚ true ⊚ false
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307) During the orientation process, new employees typically observe current employees in their jobs and then imitate their actions. ⊚ true ⊚ false
308) One purpose of employee orientation programs is to initiate new workers to the organization's policies, practices, and objectives. ⊚ true ⊚ false
309)
Vestibule training takes place in the actual work environment. ⊚ true ⊚ false
310) When employees participate in a health and wellness seminar away from the office, it is an example of off-the-job training. ⊚ true ⊚ false
311) On-the-job training is best suited for jobs that are easily learned or require the employee to perform repetitive physical tasks. ⊚ true ⊚ false
312) Apprenticeships are common in the financial industry, including banking, wealth investment, and insurance.
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true false
313) In recent years, firms have expanded off-the-job training to include personal development subjects such as time management, health and nutrition, and language. ⊚ true ⊚ false
314) Online training gives employers the ability to provide consistent content that is tailored to specific employee training needs. ⊚ true ⊚ false
315) Job simulation training attempts to precisely duplicate both the methods and conditions of a real-world job. ⊚ true ⊚ false
316)
Job simulation is used to train astronauts, airline pilots, and ship captains. ⊚ true ⊚ false
317) The strategy of giving managers assignments in a variety of departments in order to expose them to different functions is called apprenticeship training. ⊚ true ⊚ false
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318) The process of training and educating employees to become good managers, and then monitoring the progress of their managerial skills over time, is called management simulation. ⊚ true ⊚ false
319) Most management training programs include methods such as on-the-job coaching, understudy positions, job rotation, and off-the-job courses and training. ⊚ true ⊚ false
320) Networking is the process of establishing and maintaining contacts and using those contacts to develop strong relationships that serve as informal development systems. ⊚ true ⊚ false
321) A mentor is a manager who supervises, coaches, and guides selected lower-level employees, and generally acts as their organizational sponsor. ⊚ true ⊚ false
322) job.
Students can benefit from networking in college even before they take their first full-time ⊚ ⊚
323)
true false
It’s been found that mentoring programs foster more engaged employees. ⊚ true ⊚ false
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324) Minority groups have made great strides in creating networking associations. For example, Black Enterprise magazine sponsors networking forums. ⊚ true ⊚ false
325) The U.S. Supreme Court has ruled that women cannot be barred from "men only" clubs, where business contacts are often made and business activity occurs. ⊚ true ⊚ false
326) Companies that take the initiative to develop female and minority managers realize that this brings more talent into the company’s doors, leading to greater profitability in the long run. ⊚ true ⊚ false
327) Firms spend time and money to train new employees so that they will work productively over the short term. Development activities such as assigning mentors and creating networks have long-term implications for employees and firms. ⊚ true ⊚ false
328) Distance learning is gaining in popularity among all firms because employees can log on to company tutorials at a time convenient to them and acquire the same training information as everyone else. ⊚ true ⊚ false
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329) While efforts to train and develop women and minority managers appeal to many firms because of legal and moral considerations, from an economic standpoint, they are rarely cost effective. ⊚ true ⊚ false
330) Hair Stars Inc., a school for stylists, takes great pride in its training methods. Before its students are able to work one-on-one with a client, they are taught correct hair dyeing techniques, cutting and shaping methods, and layering. All of this is taught in a training salon that mimics an actual salon setting. Hair Stars is using a training method known as job replication. ⊚ true ⊚ false
331) Jordan is training to be an electrician by working alongside experienced electricians during his first year on the job. Jordan is participating in an apprenticeship program. ⊚ true ⊚ false
332) Renata is receiving training in maintaining and repairing assembly line robots at a school that uses equipment very similar to that used on her new job at Robo-Corp. Technologies. Her classroom training is called vestibule training. ⊚ true ⊚ false
333) Heather just accepted a management position at the Pleasant Green Landscape Company. In order to give her an appreciation of the different functional areas of the company, she is required to spend six weeks in each of five different functional areas of the company, including production, research and development, accounting, marketing, and the HR management department. This type of training is known as contingency employment. ⊚ true ⊚ false
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334) Samuel is an assistant manager in his firm's purchasing department. He works closely with a more experienced manager to learn how to perform all the functions involved in inventory management. Samuel believes he will soon be experienced enough to take over a senior position. Samuel has the benefit of serving as an understudy. ⊚ true ⊚ false
335) Sasha was assigned to be a mentor to Michael, who was hired as the new assistant manager for All Words Editorial Group. As a mentor, Sasha will coach and guide Michael, introduce him to the people in the office who can help advance his career, and be his organizational sponsor. ⊚ true ⊚ false
336) Tyler’s company sent him to SouthBrook University for an intensive program of leadership and business communication training. Although expensive, the firm was committed to investing in the development of key employees for the purpose of retention and promotion. This type of managerial development is known as off-the-job courses and training. ⊚ true ⊚ false
337) A performance appraisal is an evaluation in which the performance level of employees is measured against established standards to make decisions about promotions, compensation, additional training, or firing. ⊚ true ⊚ false
338) The primary reason that companies do performance appraisals is to improve worker performance.
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true false
339) Establishing performance standards is a crucial step in the performance evaluation process. ⊚ true ⊚ false
340) Most experienced workers have a clear idea of what is expected of them even if managers do not communicate their expectations explicitly. ⊚ true ⊚ false
341) Because of legal implications, managers should not use the results of performance appraisals to make decisions about promotions and compensation. ⊚ true ⊚ false
342)
Performance standards should be understandable, measurable, and reasonable. ⊚ true ⊚ false
343) A performance appraisal provides an opportunity for employees to make suggestions about how a particular task could be better performed. ⊚ true ⊚ false
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344) The last step in the performance appraisal process is to discuss the results with the employee. ⊚ true ⊚ false
345) Performance appraisals are very useful for new, inexperienced workers and first-line managers, but have little value for top management. ⊚ true ⊚ false
346)
Top-level managers can benefit from having their performance evaluated by employees. ⊚ true ⊚ false
347) An employment appraisal may include a 360-degree review, which is an appraisal that includes job-related and non-job-related comments from a range of employees. ⊚ true ⊚ false
348) A 360-degree review will include the opinions of an employee's coworkers, as well as those above him/her in the organization structure, and those who work alongside the employee in comparable positions. ⊚ true ⊚ false
349) The main reason firms conduct performance appraisals is to establish a formal record of job performance that will protect them from lawsuits filed by unhappy workers. ⊚ true ⊚ false
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350) One drawback of performance appraisals is that they cannot be completed for top management because there is no one above this level of management to carry out and evaluate the results. ⊚ true ⊚ false
351) The performance appraisal is a two-way street. It is an opportunity for managers to guide employees and for employees to make suggestions about how a task could be done better. ⊚ true ⊚ false
352) Due to the secret nature of performance standards, employees are only permitted to review these standards at the time when they receive their appraisal. ⊚ true ⊚ false
353) After manager Raja set reasonable, understandable, and measurable performance standards, he communicated these standards clearly to all team members. Based on these efforts, he should be prepared for the next step in the appraisal process. ⊚ true ⊚ false
354) When Suzanne met with Tonja to discuss her performance appraisal, Suzanne noted that Tonja had difficulty with managing her time on certain projects. One drawback of a performance appraisal is that it does not allow for feedback during the evaluation process. ⊚ true ⊚ false
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355) Greta is an office manager at Truman Investments. The company's top management recently announced it was adopting a 360-degree review process as part of the performance appraisals of its office managers. Once this policy goes into effect, Greta can expect her evaluations to include feedback from both the managers above her and the employees she supervises. ⊚ true ⊚ false
356)
Companies compete with other firms for good employees. ⊚ true ⊚ false
357) Compensation is one of the main tools a firm uses in its efforts to attract qualified employees. ⊚ true ⊚ false
358) Airlines, hotels, hospitals, and many other service organizations are so labor-intensive that the cost of labor is their primary cost of operations. ⊚ true ⊚ false
359) The long-term success of a firm often depends on its ability to control employee costs and optimize employee efficiency. ⊚ true ⊚ false
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360) One objective of a carefully managed compensation and benefit program is to retain valued employees. ⊚ true ⊚ false
361) The Hay compensation method gives managers the flexibility to adjust pay for workers doing the same job to reflect the value of their contribution to the firm. ⊚ true ⊚ false
362)
Employees who receive a salary earn a dollar amount tied to the quantity of product sold. ⊚ true ⊚ false
363) In an ongoing study, Jay Schuster concluded that the best way to compensate members of a team is to base each member's pay on her or his individual performance. ⊚ true ⊚ false
364) Skill-based pay is a method of compensating teams in which base pay is raised when team members learn and apply new skills. ⊚ true ⊚ false
365) An advantage of a skill-based system of pay for compensating teams is that such a system is easy to apply and manage. ⊚ true ⊚ false
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366) Expenditures on fringe benefits have declined as a percentage of total payroll costs over the past several decades. ⊚ true ⊚ false
367)
Fringe benefit payments account for more than 30 percent of payroll costs today. ⊚ true ⊚ false
368) Employees sometimes prefer increases in fringe benefits rather than increases in wages or salaries, because many fringe benefits are not subject to taxes. ⊚ true ⊚ false
369)
Concierge services are an example of soft benefits some firms provide for employees. ⊚ true ⊚ false
370) A fringe benefits plan that allows employees to choose the benefits they want up to a certain dollar amount is known as a soft benefit plan. ⊚ true ⊚ false
371) Many firms are now contracting with outside companies to administer their employee benefits plans. ⊚ true ⊚ false
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372) One objective of a carefully managed compensation plan is to keep labor costs low. In order to achieve this objective, a firm should strive to keep wages, salaries, and benefits at or below the compensation levels of its competitors. ⊚ true ⊚ false
373) Recent trends suggest that the best way for firms to control labor costs is to focus on limiting the growth of wages and salaries rather than controlling fringe benefits. ⊚ true ⊚ false
374) The reason that companies use the gainsharing pay system and the skill-based pay system to compensate teams of employees is that both are closely tied to rewarding the specific individual. ⊚ true ⊚ false
375) Highly compensated executives sometimes prefer fringe benefits such as club memberships, company cars, and more vacation time, as opposed to higher salaries because most often these benefits are not taxable income. ⊚ true ⊚ false
376) Some firms have found that employees prefer cafeteria-style benefit plans. For these plans, the employees vote on the benefits that they prefer, and only those benefits receiving the highest votes are offered to employees. ⊚ true ⊚ false
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377) Examples of soft benefits that a firm might offer are onsite medical services and fitness centers. ⊚ true ⊚ false
378) According to the box “Reaching Beyond Our Borders,” human resource managers must be aware that the company’s payroll department should base its decisions on standards and regulations in place in the home country. ⊚ true ⊚ false
379) According to the box “Reaching Beyond Our Borders,” companies must consider a number of compensation-related issues for employees who work abroad. These may include currency conversion issues, special concessions such as travel and housing allowances, differences in health care standards in different countries, and even vacation benefits. ⊚ true ⊚ false
380) As a salesman, Garrett’s pay is based on a percentage of his total sales. This type of pay arrangement is known as a commission. ⊚ true ⊚ false
381) Celine owns a small flower shop and employs three staff members. When one of the staff members designs more than 50 arrangements in a month, she rewards the individual with a gift certificate to a local spa. This is an example of a commission pay system. ⊚ true ⊚ false
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382) Employees at Minnesota Lakes Magazine are paid according to the Hay system. Berta and Raoul do the same type of work and report to the same supervisor. Berta has worked at the magazine for 14 years while this is Raoul’s third year. The supervisor believes Raoul is the more enthusiastic and hard-working of the two. Under the Hay system, Raoul will probably earn more than Berta. ⊚ true ⊚ false
383) The Simon Corporation is reorganizing to make more extensive use of teams. The company plans to continue paying its workers based on their individual performance. This approach is likely to maximize the success of the team by encouraging all team members to exert their best effort. ⊚ true ⊚ false
384) Employees at Crafton Welding are criticizing the company's fringe benefits package because it forces all employees to accept the same benefits regardless of differences in their personal needs. In fact, they even offer some soft benefits such as an on-site day care that over 80 percent of the employees are too young or too old to use. Crafton Welding should consider a cafeteria-style benefits plan to better meet all employee’s needs. ⊚ true ⊚ false
385) Flextime plans are popular with employees because they allow them to work fewer hours while still earning the same income. ⊚ true ⊚ false
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386) A common feature of flextime plans is the establishment of core times when all employees are expected to be at their job stations. ⊚ true ⊚ false
387)
Flextime plans are particularly well suited for workers on an assembly line. ⊚ true ⊚ false
388) In a compressed workweek, employees work more hours each day, but work fewer days each week. ⊚ true ⊚ false
389)
More than 40 percent of U.S. workers now work from home at least one day a week. ⊚ true ⊚ false
390) According to the box “Spotlight on Small Business,” no company can produce the same amount of work in a shortened workweek that they do in a regular 40-hour week. ⊚ true ⊚ false
391)
One known benefit of job sharing is reduced absenteeism. ⊚ true ⊚ false
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392) Job sharing tends to increase tardiness, because part-time workers are not as dedicated and loyal as full-time workers. ⊚ true ⊚ false
393) A disadvantage of job sharing is that it requires a firm to hire, train, motivate, and supervise more employees. ⊚ true ⊚ false
394) Most companies that have tried job sharing have concluded that the extra cost of hiring and training additional workers outweigh its benefits. ⊚ true ⊚ false
395)
Hot desking means sharing a desk with another employee who works at a different time. ⊚ true ⊚ false
396) Core time is an integral part of a flextime plan because it sets aside a specific period in the day for management to meet with employees. ⊚ true ⊚ false
397)
Telecommuting is another name for a compressed workweek. ⊚ true ⊚ false
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398) Talia works for a company that allows her to choose when she begins and ends her workday, as long as she works a required number of hours and is at her desk at certain specified core times. Talia’s company is using a compressed workweek plan. ⊚ true ⊚ false
399) Jillian’s company announced that it is going to implement a compressed workweek schedule. If Jillian takes part in this plan, she will be allowed to work fewer hours each week, as long as she completes all assignments. ⊚ true ⊚ false
400) Ferguson Frozen Foods is introducing a job-sharing plan. The company is likely to find that scheduling workers for peak periods will become easier as the result of this policy. ⊚ true ⊚ false
401) Managers at a local bank are discussing the absentee problems they are experiencing at their west-side location. Although the workers do a good job and serve customers well when they are on the job, they tend to report to work late at least two days each week, and often want to leave early. Job sharing might be a good staffing arrangement for the managers to consider. ⊚ true ⊚ false
402) Workers at the Pomegranate Diner do not have the opportunity for flextime schedules because they must be at work prior to serving hours to prepare food, and usually after the diner closes to clean up. They cannot plan their own schedule but must comply with the hours that management sets. ⊚ true ⊚ false
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403) Internal promotions are a cost-effective way of filling positions within a firm because the employees filling the position are already familiar with the organization's culture and procedures. ⊚ true ⊚ false
404) Transferring an experienced worker to a new position at the same level within an organization can be an effective way to motivate the worker to remain with the company. ⊚ true ⊚ false
405) The “employment at will” doctrine once used in the United States maintained that a firm could only fire a worker if it could demonstrate just cause. ⊚ true ⊚ false
406) To balance periods of economic uncertainty, many companies are using temporary employees and outsourcing some of their functions rather than filling vacant positions with fulltime staff. ⊚ true ⊚ false
407) A golden handshake refers to the severance pay that is offered to a worker that is laid off when the firm downsizes. ⊚ true ⊚ false
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408) Exit interviews by a third party can be an effective way for a firm to prevent future losses of valuable employees. ⊚ true ⊚ false
409) One positive aspect of offering early retirement programs instead of layoffs during downsizing is the increased morale among remaining employees. ⊚ true ⊚ false
410) The prevalence of flatter corporate structures in recent years has increased the number of workers that firms promote. ⊚ true ⊚ false
411) Management is turning to a strategy of offering more lateral transfers because many companies are operating under a flatter organization structure. ⊚ true ⊚ false
412) The doctrine of “employment at will” means that employees must be allowed to keep their jobs as long as they are willing and able to perform their required duties. Under this doctrine, employers can only fire or lay off an employee if the firm is in serious financial difficulty or the employee is grossly incompetent or has committed a felony. ⊚ true ⊚ false
413) The golden handshake is a popular method of firing or dismissing senior members of your workforce.
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⊚ ⊚
true false
414) Marketing manager Geoff Roberts has worked for ShoreSide Sightseeing for 39 years. He fondly remembers the "good old days" when he could fire a worker for just about any reason. He feels that today's laws and regulations force him to keep employees that don't measure up to his standards. Geoff’s views suggest he would favor working in a state that implements the policy of “employment at will.” ⊚ true ⊚ false
415) Top managers at The Lawrence Corporation have decided that the company must downsize, but are concerned about the effect the reduction in employment will have on the morale of the remaining employees. One way top management could keep morale from suffering would be to establish an early retirement program. ⊚ true ⊚ false
416) Celeste hired Jordan to join her company’s marketing staff just last year when he graduated from college. Yesterday, Jordan submitted his resignation and disclosed that he is leaving the firm and taking a job where he will be in charge of promotions and events in a similar firm. Celeste is beside herself and has decided to personally conduct an exit interview. In evaluating this situation, you agree that Celeste is probably the best person to conduct this interview. ⊚ true ⊚ false
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417) Nathan’s company just learned it lost the Arlington Account, a long-standing customer. In the short term, this will significantly reduce the need for several creative writers and web content developers the company has on staff. Nathan reviews the best way to approach the task of dismissing employees. He decides that it is best not to tarnish the image of the company so rather than tell each that they lost an important account, he will blame the need to reduce the workforce on new technology the firm is implementing. He also plans to offer a two-month severance payment, as long as each signs a no-compete agreement good for one year. In that way, he may be able to call them back if new accounts emerge. These strategies are considered good procedures that would surely avoid "wrongful discharge lawsuits." ⊚ true ⊚ false
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Answer Key Test name: chapter 11 6) C 7) D 8) B 9) A 10) D 11) A 12) C 13) C 14) C 15) B 16) A 17) C 18) C 19) D 20) C 21) C 22) A 23) C 24) B 25) A 26) D 27) D 28) B 29) D 30) B 31) D
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32) C 33) D 34) D 35) A 36) C 37) A 38) D 39) D 40) C 41) A 42) C 43) D 44) B 45) B 46) A 47) C 48) D 49) B 50) C 51) C 52) D 53) C 54) B 55) A 56) B 57) D 58) A 59) B 60) A 61) C
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62) B 63) C 64) A 65) D 66) A 67) A 68) B 69) C 70) A 71) A 72) B 73) A 74) D 75) A 76) D 77) A 78) B 79) C 80) B 81) A 82) D 83) B 84) A 85) C 86) B 87) A 88) D 89) C 90) D 91) D
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92) C 93) A 94) B 95) C 96) B 97) A 98) A 99) A 100) C 101) B 102) C 103) D 104) B 105) C 106) D 107) A 108) B 109) C 110) A 111) C 112) D 113) C 114) D 115) B 116) A 117) B 118) D 119) D 120) A 121) B
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122) C 123) D 124) A 125) D 126) B 127) C 128) A 129) D 130) A 131) A 132) C 133) B 134) B 135) D 136) A 137) B 138) D 139) B 140) C 141) A 142) B 143) C 144) B 145) D 146) D 147) B 148) A 149) C 150) C 151) B
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152) A 153) C 154) A 155) D 156) D 157) A 158) A 159) C 160) D 161) B 162) A 163) B 164) D 165) C 166) A 167) D 168) B 169) D 170) B 171) C 172) B 173) D 174) C 175) C 176) D 177) D 178) B 179) C 180) A 181) B
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182) B 183) A 184) B 185) A 186) C 187) A 188) D 189) B 190) C 191) B 192) B 193) D 194) A 195) D 196) B 197) C 198) D 199) Section Break 199.1) A 199.2) B 199.3) D 199.4) B 200) TRUE 201) TRUE 202) FALSE 203) FALSE 204) TRUE 205) FALSE 206) FALSE 207) TRUE
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208) TRUE 209) FALSE 210) TRUE 211) TRUE 212) FALSE 213) TRUE 214) TRUE 215) TRUE 216) FALSE 217) FALSE 218) TRUE 219) FALSE 220) TRUE 221) FALSE 222) FALSE 223) TRUE 224) TRUE 225) FALSE 226) FALSE 227) TRUE 228) TRUE 229) FALSE 230) FALSE 231) FALSE 232) TRUE 233) FALSE 234) TRUE 235) FALSE 236) FALSE 237) FALSE
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238) FALSE 239) FALSE 240) FALSE 241) FALSE 242) FALSE 243) FALSE 244) TRUE 245) TRUE 246) FALSE 247) TRUE 248) FALSE 249) TRUE 250) TRUE 251) FALSE 252) TRUE 253) FALSE 254) TRUE 255) TRUE 256) TRUE 257) FALSE 258) TRUE 259) FALSE 260) TRUE 261) TRUE 262) FALSE 263) TRUE 264) TRUE 265) TRUE 266) TRUE 267) FALSE
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268) FALSE 269) TRUE 270) FALSE 271) TRUE 272) FALSE 273) TRUE 274) FALSE 275) FALSE 276) FALSE 277) TRUE 278) TRUE 279) TRUE 280) FALSE 281) TRUE 282) TRUE 283) FALSE 284) FALSE 285) FALSE 286) TRUE 287) FALSE 288) TRUE 289) TRUE 290) TRUE 291) TRUE 292) FALSE 293) TRUE 294) TRUE 295) FALSE 296) FALSE 297) TRUE
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298) FALSE 299) FALSE 300) TRUE 301) FALSE 302) TRUE 303) FALSE 304) TRUE 305) TRUE 306) TRUE 307) FALSE 308) TRUE 309) FALSE 310) TRUE 311) TRUE 312) FALSE 313) TRUE 314) TRUE 315) TRUE 316) TRUE 317) FALSE 318) FALSE 319) TRUE 320) TRUE 321) TRUE 322) TRUE 323) TRUE 324) TRUE 325) TRUE 326) TRUE 327) TRUE
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328) TRUE 329) FALSE 330) FALSE 331) TRUE 332) TRUE 333) FALSE 334) TRUE 335) TRUE 336) TRUE 337) TRUE 338) TRUE 339) TRUE 340) FALSE 341) FALSE 342) TRUE 343) TRUE 344) FALSE 345) FALSE 346) TRUE 347) FALSE 348) TRUE 349) FALSE 350) FALSE 351) TRUE 352) FALSE 353) TRUE 354) FALSE 355) TRUE 356) TRUE 357) TRUE
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358) TRUE 359) TRUE 360) TRUE 361) FALSE 362) FALSE 363) FALSE 364) TRUE 365) FALSE 366) FALSE 367) TRUE 368) TRUE 369) TRUE 370) FALSE 371) TRUE 372) FALSE 373) FALSE 374) FALSE 375) TRUE 376) FALSE 377) TRUE 378) FALSE 379) TRUE 380) TRUE 381) FALSE 382) FALSE 383) FALSE 384) TRUE 385) FALSE 386) TRUE 387) FALSE
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388) TRUE 389) TRUE 390) FALSE 391) TRUE 392) FALSE 393) TRUE 394) FALSE 395) TRUE 396) FALSE 397) FALSE 398) FALSE 399) FALSE 400) TRUE 401) TRUE 402) TRUE 403) TRUE 404) TRUE 405) FALSE 406) TRUE 407) FALSE 408) TRUE 409) TRUE 410) FALSE 411) TRUE 412) FALSE 413) FALSE 414) TRUE 415) TRUE 416) FALSE 417) FALSE
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Student name:__________ 1) Identify several laws that significantly influenced labor-management relations. Discuss the major provisions of each law.
2) Explain the difference between closed, open, union, and agency shop agreements. What impact did the Taft-Hartley Act have on the use of closed and union shop arrangements?
3) Identify and describe the major tactics used by unions and management when collective bargaining efforts break down.
4)
Identify and discuss three controversial employee-management issues.
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5) Union membership has declined in recent years. What has led to this decline and what can unions do to turn this trend around?
6) A(n) __________ is an employee organization that represents workers in employeemanagement bargaining over job-related issues. A) trades guild B) union C) ESOP D) cross-functional team
7)
The presence of formal labor organizations in the United States dates back to the A) late 1700s. B) Civil War. C) late 1800s. D) depression years of the 1930s.
8)
Unions were originally formed
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A) to make certain that there were an equal number of nonmanagement and management-level employees within the company. B) to uphold the state and federal laws under which businesses operate. C) to seek protection against unfair treatment. D) to seek worker corporate voting rights, the same as stockholders.
9) The union movement in the United States was an outgrowth of the economic transition caused by the A) Revolutionary War. B) Great Depression. C) Industrial Revolution. D) civil rights movement.
10)
Labor unions were largely responsible for A) establishing the Republican party. B) the basic structure of the federal income tax system. C) the passage of NAFTA. D) minimum wage laws and laws against child labor.
11)
The purpose of the earliest recognized labor unions in the United States was A) to achieve some short-range goals and then disband. B) to achieve long-range foundations for their crafts. C) to teach their crafts to new workers. D) to enhance the reputations of their members.
12)
The first national labor organization in the United States was the
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A) Knights of Labor. B) Congress of Industrial Organizations. C) American Federation of Labor. D) United Farm Workers Union.
13)
Membership in the Knights of Labor was
A) limited to skilled craftsmen. B) limited to unskilled and semiskilled workers who belonged to industrial unions. C) open to all working people, including employers. D) open to anyone willing to promote capitalism as the economic system most likely to lead to economic prosperity for the working men and women of the United States.
14)
In a(n) __________, all the members are skilled specialists in a particular trade. A) ESOP B) craft union C) industrial union D) trade federation
15) __________ provided dynamic leadership for the American Federation of Labor during its early years. A) John L. Lewis B) Taft-Hartley C) George Meany D) Samuel Gompers
16)
The AFL was concerned primarily with
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A) fundamental labor issues. B) gaining political power. C) forming a workers' army to lead a socialist revolution. D) promoting a better public education system.
17)
In its early years, the AFL's strategy was to A) grow as rapidly as possible by allowing people from all professions and walks of life
to join. B) limit its membership to skilled craftspeople. C) limit its membership to unskilled and semiskilled workers. D) form one big craft union which everyone could join; but it later split into several smaller organizations.
18) The Congress of Industrial Organizations (CIO) organized unskilled and semiskilled workers into A) craft unions. B) a political party. C) industrial unions. D) union shops.
19)
The __________was set up as a federation of many separate craft unions. A) Knights of Labor (KoL) B) Congress of Industrial Organizations (CIO) C) League of Unions (LoU) D) American Federation of Labor (AFL)
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20) In the early years, there were power struggles among the larger national unions. Leaders recognized that there was power in numbers. After the passage of the Taft-Hartley Act in 1947, A) the CIO defeated the AFL. B) the "Change to Win" campaign emerged. C) the AFL and CIO merged. D) the unions collapsed for several years.
21)
The Industrial Revolution was characterized by a
A) transition for workers from agriculture-based industry to work in factories and assembly lines. B) migration of manufacturing jobs from the Midwest and Northeast to the South as firms began locating in areas where labor costs were lower. C) rapid improvement in the wages and working conditions of most workers, resulting in a decline in the need for labor unions. D) movement away from scientific management, and a greater acceptance of the ideas of Herzberg and Maslow.
22) Critics of labor unions argue that unions are no longer needed to protect workers from abusive and unfair treatment because A) the widespread use of ESOPs has given most workers control over their workplace. B) supply and demand conditions in labor markets now favor labor rather than management. C) laws and modern management attitudes minimize the possibility of unsafe working conditions and unfair treatment of workers found in earlier eras. D) most of the firms that treated workers poorly have moved their operations to foreign countries.
23) A major reason John L. Lewis and his followers broke with the AFL and formed the CIO was that
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A) the leaders of the AFL wanted to focus on political objectives while Lewis and his followers wanted to focus on economic objectives. B) Lewis felt that the AFL was growing too fast. C) the leaders of the AFL wanted to organize only skilled workers, while Lewis and his followers wanted to organize both unskilled and skilled workers. D) Lewis believed that the AFL would be more flexible and responsive to its members if it split into several smaller organizations, each representing workers with one specific skill.
24) The AFL originally was a federation of craft unions that did not attempt to organize industrial unions. The main reason for this strategy was that A) industrial unions were illegal until the passage of the Taft-Hartley Act in 1947. B) the leaders of the AFL believed that the skilled workers represented by craft unions would have better bargaining power than unskilled workers. C) craft unions had more political clout than industrial unions. D) most industrial unions had supported the Knights of Labor in a dispute with the AFL during the 1880s.
25)
At this time, close to 50 percent of all union workers are A) employed by governments. B) employed by private, for-profit industries. C) employed by health care companies. D) in management positions.
26) Which statement is the most accurate assessment of the historical role of the AFL in the labor movement?
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A) In its early years, the AFL attracted a lot of public attention and political support because it was the first truly national labor organization in the United States. B) In its early years, the AFL operated as one union, but soon split into two interdependent groups and became known as the AFL-CIO. C) In its early years, the AFL was a federation of craft unions that championed basic labor issues. D) In its early years, the AFL had limited success because it suffered from poor leadership.
27) According to the featured box “The Fire That Changed Labor Laws,” the tragedy at the Triangle Shirtwaist Company caused A) labor leaders to call for a limit of workers during a single shift. B) Americans to turn down factory jobs. C) the number of union members to increase. D) the number of union members to decline.
28) Jon received specific training to become a carpenter. He belongs to a union with other skilled carpenters. Jon belongs to a(n) A) industrial union. B) craft union. C) open union. D) company union.
29) Garth is an assembly line worker for a major automobile manufacturer. When he was first hired for the job, he did not have any specific training or skill. Garth joined a union with other assembly-line workers who perform a variety of jobs that do not require a highly specialized skill. Garth belongs to a(n)
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A) industrial union. B) craft union. C) assembly union. D) traditional union.
30)
The two major influences on the growth of unions in the United States were A) population growth and the agrarian economy. B) the agrarian economy and the Taft-Hartley Act. C) the Taft-Hartley Act and support of management. D) laws that supported unionizing and public opinion.
31)
The __________Act established the National Labor Relations Board. A) Wagner B) Taft-Hartley C) Norris-LaGuardia D) Fair Labor Standards
32) __________ is the process by which a union becomes recognized by the National Labor Relations Board as the bargaining agent for a group of employees. A) Accreditation B) Certification C) Arbitration D) Compensation
33) __________ is the process by which a group of workers legally take away a union's right to represent them.
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A) Disqualification B) Decertification C) Impeachment D) Disenfranchisement
34) __________ is the process by which representatives of a union meet with representatives of management to negotiate a contract for workers. A) Mediation B) Arbitration C) Mutual conciliation D) Collective bargaining
35) The __________ was established by the Wagner Act to oversee labor-management relations. A) Federal Trade Commission B) Commission on Labor Relations C) National Labor Relations Board D) Equal Employment Opportunity Commission
36)
The first federal minimum wage was established in 1938 by the A) Fair Labor Standards Act. B) Wagner Act. C) Minimum Compensation Act. D) Pay Equity Act.
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37) The __________ outlawed the use of yellow-dog contracts and prohibited courts from issuing injunctions against nonviolent union activities. A) Landrum-Griffin Act B) Fair Labor Standards Act C) Wagner Act D) Norris-LaGuardia Act
38) At one time, as a condition of employment, the employer could make the employee sign a statement prohibiting the worker from joining a union. What was this called? A) arbitrary agreement B) yellow-dog contract C) right-to-work contract D) employment at will agreement
39) The __________ guaranteed the rights of individual union members when dealing with their union. A) Wagner Act B) Landrum-Griffin Act C) Norris-LaGuardia Act D) Taft-Hartley Act
40) Which legislative act gave more power to management in its relations with organized labor? A) Norris-LaGuardia Act B) Landrum-Griffin Act C) Wagner Act D) Taft-Hartley Act
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41)
One feature of the Taft-Hartley Act was that it
A) established the first minimum wage. B) allowed individual states to pass right-to-work laws prohibiting compulsory union membership. C) required management to bargain in good faith with union representatives. D) set up the process by which unions could be recognized as the exclusive bargaining agents for a group of workers.
42) The __________ guaranteed union members the right to nominate candidates for union office and participate in union meetings. A) Taft-Hartley Act B) Fair Labor Standards Act C) Norris-LaGuardia Act D) Landrum-Griffin Act
43)
One goal of the Landrum-Griffin Act was to
A) firmly establish the right of unions to engage in collective bargaining. B) set up the means by which unions could be certified as bargaining agents for workers. C) clean up the corrupt practices of unions. D) prevent employees engaged in providing critical services such as health care or police protection from going out on strike.
44)
The National Labor Relations Board (NLRB) consists of
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A) a five-member panel appointed by the U.S. president. B) an eight- or ten-member board consisting of an equal representation of union officials and management personnel. C) two large unions: the AFL and the CIO. D) a congressional committee.
45)
The Wagner Act is best described as a(n) A) pro-management law. B) pro-union law. C) anti-communism law. D) anti-collective bargaining law.
46) The Labor-Management Relations Act (Taft-Hartley Act) can be best described as a law which A) gave unions much more power and led to a rapid rise in union membership. B) gave employees the right to serve on the board of directors of their company, thus encouraging a more equitable treatment of workers. C) eliminated the need for unions in many industries by providing workers with widespread rights and protection against unfair labor practices by employers. D) placed limitations on union activities and gave more power to management in dealing with unions.
47)
The primary purpose of collective bargaining is to
A) ensure worker participation in setting the goals and objectives of the company. B) establish and communicate clear guidelines for performance appraisals. C) limit the authority of management to set job categories and direct worker activities. D) negotiate a labor-management agreement that both the union and management are willing to accept.
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48) If public employees and their union representatives were prohibited by a vote in the state senate from negotiating with government officials on issues that affected their labor contracts, which rights would be directly affected? A) collective bargaining B) process negotiation C) yellow-dog contracting D) decertification
49) Kyra belongs to a labor union. She believes a few key people run the union by meeting secretly and making decisions without informing other members or allowing them to fully participate in the meetings. If Kyra’s suspicions are correct, the union is violating provisions of the __________ Act. A) Landrum-Griffin B) Fair Labor Standards C) Taft-Hartley D) Wagner
50) The management at an auto manufacturer planned to terminate production due to labor issues that were consuming most of the profits. For years, the strong union at this facility did some tough negotiating with the company's corporate headquarters. In a company-wide vote, employees agreed to walk away from union membership in order to keep the factory open and save their jobs. The National Labor Relations Board (NLRB) agreed that it was in the best interest of the employees. __________ was started to take away the rights of union representation at the factory. A) Lobbying B) Decertification C) Arbitration D) Certification
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51) During the 1920s and early 1930s, the Shoreway Boot Factory was able to prevent workers from forming a union by requiring them to sign an employment contract in which they agreed not to join a union as a condition of employment. Shoreway Boot Factory was making use of A) yellow-dog contracts. B) blacklisting agreements. C) injunctions. D) implied consent decrees.
52) Travis believes that management is treating him unfairly because of his efforts to organize a vote for union representation. Which organization should he contact to report his concerns? A) Federal Board of Labor Rights (FBLR) B) National Labor Relations Board (NLRB) C) Federal Trade Commission (FTC) D) Federal Commission on Unfair Labor Practices (FCULP)
53) Union leaders at the Atlantic Corporation are furious. Although the union is certified by the NLRB, its negotiating team has had little success in getting management to meet with them to work on a new labor contract. In fact, during the last three months, the management team has agreed to meet only twice, once on a weekend, and the other time after 8:00 p.m. Even during those two meetings, the management team was unwilling to offer serious proposals. Atlantic’s management team should review the legal rights of union members to participate in collective bargaining, as provided under the A) Taft-Harley Act. B) Norris LaGuardia Act. C) Wagner Act. D) Landrum-Griffin Act.
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54)
The objectives of labor unions have A) always placed the greatest emphasis on increasing wages and benefits. B) shifted with social and economic conditions. C) frequently taken global competition into account. D) favored craft unions.
55) The __________ sets the tone and clarifies the terms and conditions under which labor and management agree to function over a specific period of time. A) negotiated labor-management agreement B) right-to-work agreement C) open shop stipulation D) arbitration stipulation
56) Under __________, workers are not required to join the union, but those who do not join are still required to pay a union fee or regular dues to the union. A) right-to-work laws B) all union security clauses C) agency shop agreements D) Employee Stock Option Plans (ESOPs)
57) Under a(n) __________ shop agreement, workers must belong to the union before they are hired. A) open B) union C) agency D) closed
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58) The justification for dues or fees paid by nonunion members to the union in a(n) __________ shop is that the union represents all workers in collective bargaining, not just those who belong to the union. A) closed B) agency C) fee simple D) union
59) In a(n) __________ shop, workers do not have to belong to a union before they are hired, but they must join a union within a specified period (usually 30, 60, or 90 days) in order to keep their job. A) agency B) closed C) open D) union
60) If a union is present in a firm that has a(n) __________ shop arrangement, workers may join the union if they wish, but they are not required to join or pay a union fee in order to keep their jobs. A) open B) unrestricted C) freedom of choice D) agency
61) The majority of grievances between labor and management are resolved by a(n) __________ who works in the organization and represents employees on a daily basis.
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A) arbitrator B) shop steward C) mediator D) president
62)
Closed shops were declared illegal by the A) Taft-Hartley Act. B) Norris-LaGuardia Act. C) National Labor Relations Board in 1929. D) U.S. Supreme Court in 1946.
63) __________ is the use of a third party to encourage labor and management to continue negotiating in an effort to settle a labor dispute or achieve a mutually acceptable labormanagement agreement. A) Arbitration B) Mediation C) Reconciliation D) Intercession
64) The process of bringing in an impartial third party to render a binding decision in a labor dispute is referred to as A) resolution. B) mediation. C) arbitration. D) certification.
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65) If management and union officials cannot resolve a grievance, a(n) __________ is asked to listen to the arguments of each side and to make a decision that both sides will have to comply with. A) manager B) counselor C) arbitrator D) mediator
66)
Which topic is generally covered in a negotiated labor-management agreement? A) corporate pricing policy B) grievance procedures C) management fringe benefits D) management compensation
67)
What is a characteristic of a union shop?
A) Workers must join the union within a stipulated time period (usually 30, 60, or 90 days) in order to keep their jobs. B) Workers must belong to the union before the company can hire them. C) Workers who do not join the union must pay a union fee. D) Workers are required to sign yellow-dog contracts.
68) The key difference between an agency shop agreement and an open shop agreement is that in an agency shop
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A) workers must join the union within a stipulated time period (usually 30, 60, or 90 days) in order to keep their jobs, but in an open shop the workers are not required to join the union. B) the union is restricted to a limited number of employees who perform specific types of jobs, but in an open shop membership in the union is available to all workers. C) workers who do not join the union must pay a fee or regular dues, while in an open shop workers who choose not to join the union do not have to pay any union fees or dues. D) workers must agree not to join a union in order to keep their jobs while in an open shop workers are free to join a union if they wish, but they are not required to do so.
69)
A key difference between a mediator and an arbitrator is that
A) a mediator is appointed by labor and management, while an arbitrator is appointed by the federal government under terms set forth in the Taft-Hartley Act. B) a mediator is an unpaid volunteer, while an arbitrator is a paid professional. C) an arbitrator can settle a labor-management dispute by rendering a binding decision, while a mediator can only make suggestions and encourage the two sides in a dispute to continue negotiating. D) a mediator is a lawyer who represents either labor or management in a labor dispute, while an arbitrator is an impartial advisor who listens to both sides of the dispute and offers suggestions that help the two parties reach a mutually acceptable agreement.
70)
A grievance is
A) an implication that management has broken a management-union agreement, but it must be proven. B) an employee's perception that management has not in some way fulfilled a labor contract agreement. C) the disappointment that members of a union feel when management refuses to participate in good faith collective bargaining. D) the result of a poorly arbitrated conflict.
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71) Labor unions and management hope to resolve issues through collective bargaining. Each side comes to the table with a range of options they are willing to consider, some more appealing than others. All options that each will consider fall within the A) the LRB list of possibilities. B) decertification list. C) open shop agreement. D) bargaining zone.
72) Riley, who is philosophically opposed to unions, often says, "Why should I be required to join an organization I don't agree with, or pay a fee to support it financially? I thought this was a free country, but I don't feel very free when I'm told that I'll lose my job if I don't join the union. It just isn't fair." Riley’s comments suggest he favors a(n) __________ shop arrangement. A) closed B) open C) regulated D) certified
73) Jillian was recently hired at Benson Industries as a repairperson. Upon starting her new job, she was informed that if she chose to not join the union representing her fellow repair workers, she would still have to pay a fee to the union. Apparently, Benson Industries operates under a(n) A) illegal arrangement, since nonmembers can never legally be required to pay fees to unions. B) closed shop agreement. C) union shop agreement. D) agency shop agreement.
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74) In the late 1930s, management at Mississippi Industries agreed to hire only those workers who were already members of the Plumbers Union. The company agreed to a type of arrangement known as a(n) A) closed shop. B) open shop. C) union shop. D) restricted shop.
75) At the Ashley Corporation, union and management have not been able to reach a mutually satisfactory agreement on a grievance. The two sides have agreed to bring in a(n) __________ who will examine the evidence and arguments on both sides and issue a binding decision. A) mediator B) arbitrator C) foreman D) union steward
76) During negotiations for a new faculty contract at a university, the __________ was quite narrow. Of thirteen items, the union representatives wanted concessions on the following items: Nos. 1, 2, 3, 4, 5, 7, 9, 10, and 13. The union overlapped with the university administration on the remaining items: Nos. 6, 8, 11, and 12. A) negotiation degree B) bargaining zone C) breakdown criteria D) grievance claim
77) Zema believes that her manager violated the terms of the negotiated labor-management agreement when he required her to report to work on a holiday. She discussed her concerns with her shop steward and he agrees with her. It is likely the steward will encourage Zema to
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A) start looking for another job in a right-to-work state. B) contact the local chapter of the ACLU. C) send a letter of protest to the president of the union. D) pursue a grievance over the interpretation of the labor contract.
78) You've been on your hour-long lunch break for less than 45 minutes when your boss orders you to return to work immediately or lose an hour's pay. You complain that the current labor contract specifies a full hour for your lunch break and you still have over 15 minutes left. Your boss stands firm on his order for you to return to work. Under protest, you return to work, but plan to file a grievance. The first step you should take is to contact a(n) A) arbitrator. B) mediator. C) strikebreaker. D) shop steward.
79) Dr. Petrick, a professor at a local university, has been working with union leaders and management at Henderson Corporation to help the two sides resolve differences over desired wage levels for a new contract. First, he met with each side privately to determine any common ground for agreement. For the past week, he has worked with representatives from each side to promote communication and compromise at the bargaining table. Dr. Petrick is a(n) A) arbitrator. B) mediator. C) fact finder. D) shop steward.
80) Sanjay believes that an agency shop is the most desirable union security arrangement. Which statement would be most likely to represent Sanjay’s views?
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A) A union can succeed in its collective bargaining efforts only if it represents all workers. Therefore, workers should be required to join the union soon after they are hired. B) Workers should be allowed to join a union if they wish, but they should not be required to join or pay a fee to the union in order to keep their job. C) Workers should not be required to join a union to keep their jobs. However, since all workers enjoy the benefits obtained through collective bargaining, even those who do not join should pay a fee to support the union. D) Unions should be replaced by employee stock ownership plans that give workers a say in the management of their firms.
81) Frances has been a member of the American Arbitration Association and faculty member of the business school of a university for over a decade. Right now, she is on a plane headed for Detroit, where she will serve as an arbitrator between members of the United Auto Workers union and management of a major auto manufacturer. Her responsibilities will deal with A) certifying union representation at the Michigan manufacturing sites. B) certifying union representation and collective bargaining at all manufacturing sites that the auto manufacturer currently has in operations, including any in Mexico and Canada (in accordance with NAFTA). C) listening to both sides of an unresolved dispute between labor and management and rendering a binding decision on the problem. D) protecting the interests of management and staving off a strike by the auto workers.
82) A management executive just left a meeting between her team and the company's union representatives. She headed straight for the CEO's office to review where things seemed to break down. Union representatives came to the table with three different offers to resolve the insurance and vacation benefits problems laborers were experiencing. Management offered its own resolutions—two different ones, to be exact. The problem was that a bargaining zone did not emerge. Neither side was willing to consider each other's alternatives. After hearing about the meeting, the CEO was ready to concede that the negotiations were probably headed to
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A) collective bargaining. B) arbitration. C) a vote. D) mediation.
83) Historically, the most potent union tactic when collective bargaining efforts break down has been the A) strike. B) lockout. C) court injunction. D) primary boycott.
84) A(n) __________ occurs when a union encourages its members and the general public not to buy the products of a firm involved in a labor dispute. A) injunction B) wildcat strike C) primary boycott D) embargo
85) A(n) __________ is a court order directing someone to do something or to refrain from doing something. A) covenant B) injunction C) arbitration D) grievance
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86) Two of the most important tactics used by unions when collective bargaining efforts break down are A) strikes and boycotts. B) injunctions and lockouts. C) certification and yellow-dog contracts. D) enforcement of right-to-work clauses and cooling-off periods.
87) A(n) __________ boycott is an illegal attempt by labor to convince others to stop doing business with a firm that does business with a company that is the subject of a primary boycott. A) extended B) secondary C) tactical D) strategic
88) A(n) __________ occurs when management temporarily closes a business to deny employment to workers. A) lockout B) secondary boycott C) involuntary strike D) employment injunction
89)
At this time, the largest labor organization in the United States is the A) Teamsters Union. B) Service Employees International Union (SEIU). C) United Automobile Workers (UAW). D) National Education Association (NEA).
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90) Despite a 1938 Supreme Court ruling allowing their use, __________ were seldom used by management during labor-management disputes until the 1980s. A) injunctions B) secondary boycotts C) strikebreakers D) yellow-dog contracts
91) Under the provisions of the Taft-Hartley Act, the president can ask for a(n) __________ to prevent a strike in a critical industry. A) arbitrator B) cooling-off period C) open shop agreement D) temporary take over by the federal government
92) The __________ is a tactic police, firefighters, and other workers who are not legally allowed to strike sometimes use to express their frustration and displeasure with working conditions or pay. A) gold cold B) steel deal C) slow-mo D) blue flu
93)
__________ are workers a company hires to replace workers who are out on strike.
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A) Yellow dogs B) Convergent workers C) Structural replacements D) Strikebreakers
94) Which tactic would management be most likely to use during a labor-management dispute? A) picketing B) secondary boycotts C) lockouts D) primary boycotts
95)
The ability of unions to achieve key goals in the future will depend on their ability to
A) reestablish their base of strength in the manufacturing sector. B) find ways to cooperate with management in training workers and redesigning jobs. C) repeal the Wagner Act and the Norris-LaGuardia Act in order to eliminate restrictions on union tactics. D) return to the confrontational tactics used successfully in the 1930s when unions grew rapidly.
96)
One strategy unions must adopt in order to grow in the future is to
A) find ways to appeal to white-collar, female, and foreign-born workers. B) find ways to prevent foreign companies from entering the U.S. market. C) go back to the old methods of aggressive tactics and confrontation that were used successfully in the past. D) emphasize recruiting efforts in the manufacturing sector of the economy.
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97)
A strike can affect a company because it can A) cause the union to disband. B) cause operations to slow down. C) create more demand for the company’s product or service. D) help suppliers improve their image.
98) When workers go on strike, management is often compelled to keep the business operation running. If it is unable to achieve this on its own, management may A) elect to proceed with a lockout. B) close down the facility and permanently fire the strikers. C) hire strikebreakers. D) picket.
99) Speculating on the future of organized labor unions, which statement best summarizes real concerns? A) Future union membership will significantly increase, due to workers age 19–30 perceiving value in union representation and membership. B) The age of union members is heavily skewed. Most members are 45 and older. Unions will be challenged to recruit younger employees to support the unions. C) Due to headstrong union negotiators who have refused givebacks, the value of unions will decline. D) The UAW (United Auto Workers) will continue to advance as the most powerful union in the U.S., while the public sector employee unions will continue to experience decline.
100)
The box "Making Ethical Decisions” discusses
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A) the violence that occurs at picket lines, and the ethical obligations of those responsible. B) the ethics of participating as a strikebreaker in your community. C) how givebacks are very unethical on the part of management in large operations and an indication that management has "crossed the line." D) the ethics of participating in the blue flu.
101) When Nelson arrived at the plant on Monday, the doors were chained shut and no workers were allowed in. There was a sign posted on the door, “Workers who don’t want to work, don’t get paid.” Nelson realized this was in response to the union requesting a pay increase and he was shocked to see how the company responded. What tactic is the company using to pressure the union? A) boycott B) lockout C) strike D) arbitration
102) When Stacey and her mom arrived at the hotel, they noticed a large group of people walking outside of the entrance. They were carrying signs and chanting about unfair wages. Stacey and her mom were witnesses to A) boycotting. B) decertification. C) striking. D) picketing.
103) At HillSide Pharmaceuticals Group, union reps strongly discouraged the firm's union employees from buying the company's products. Recently, they took out an ad with an important message for consumers: "Don't give HillSide your money. They don't share it with their employees!" What do these actions best describe?
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A) secondary boycott B) primary boycott C) direct strikebreaker initiative D) strikebreaker tactic
104) Several Edison Heights police officers called in sick—one after the other. As the dispatcher took the calls, she thought there could be more to this story than she was hearing. In fact, she thought it might be related to the discussion she heard in the break room last night. Several officers were leaving their shifts and were not happy with the recent changes in scheduling, the excessive overtime hours, and management's reluctance to begin negotiations on a new benefits package. She even heard one officer saying, "It's time for a mental health day!" Although it is illegal for police to strike, what the police dispatcher was witnessing may have been A) a grievance. B) the blue flu. C) a lockout. D) a cooling-off period.
105) The Teamsters are currently involved in a labor dispute with RealFruit Corp. The union has already encouraged its members and the general public not to buy RealFruit products. Now it is threatening Food Junction grocery stores with the possibility of a boycott if it continues to carry the RealFruit line. Food Junction is being threatened with a(n) A) primary boycott. B) secondary boycott. C) jurisdictional boycott. D) informational boycott.
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106) At the Swiss Alp Yogurt factory, a number of striking workers are picketing at the plant entrance. Because the picketers have started threatening people entering the plant and are vandalizing some company property, Swiss Alp management believes it has just cause to ask the courts for a(n) __________ placing limits on the number of pickets and their actions while picketing. A) preemptive judgment B) writ of contention C) arbitration judgment D) injunction
107) After Five Brewing Company and the AFL-CIO are in an eight-month-long labor dispute. The AFL-CIO has called on its membership and the general public to refuse to purchase After Five Brewing products. The AFL-CIO is calling for a A) general boycott. B) secondary boycott. C) primary boycott. D) public boycott.
108) Dockworkers were locked out of their jobs in 29 West Coast ports. Because many consumer goods used in the United States are transported from Asia to the United States through these ports, the lockout could have damaged the U.S. economy and security if allowed to continue. The U.S. president ordered the dockworkers back to work and both sides were ordered back to the bargaining table. Which statement is the most accurate conclusion about the outcome of the labor dispute between the dockworkers’ union and shipping companies on the West Coast?
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A) The dispute between the dockworkers and shipping companies showed that the only effective weapon unions now have in labor-management disputes is the threat of a strike. B) The dispute between the dockworkers and shipping companies showed that arbitration is the only effective way to settle labor-management disputes in industries that are critical to the nation's safety or security. C) The dispute between the dockworkers and shipping companies showed that the TaftHartley Act must be invoked when critical industries are involved. D) The dispute between the dockworkers and shipping companies showed that unions have become so powerful that they can shut down the entire U.S. economy.
109) Mercury Wireless anticipated that 10,000 workers were planning to strike over unfair compensation. Management started to call staffing agents to temporarily employ persons to cover for striking employees. Traditionally, these workers are called A) mobile temps. B) picket busters. C) strikebreakers. D) boycotters.
110) A comparison of compensation of CEOs in the United States with compensation of top executives in Europe shows that A) U.S. CEOs are working for much lower compensation. B) pay for CEOs at major corporations is about the same in all of these nations. C) executives in the U.S. are compensated at a much higher rate. D) U.S. executives are paid better than average when their firms are successful, but worse than average when their firms struggle.
111)
What assertion is supported by noted economist Thomas Piketty?
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A) Top executives are entitled to any level of pay they can negotiate with their board of directors. B) Companies should not place arbitrary limits on the annual pay given to their top executives. C) All bonuses paid to CEOs should be tied to long-run increases in market share. D) CEOs should not earn more than 100–200 times the earnings of the company's average wage.
112)
Over the past several decades, the compensation of CEOs of large U.S. corporations has A) remained relatively stable once inflation is taken into account. B) become based more on salary and less on stock options. C) increased enormously, even when inflation is taken into account. D) consistently lagged behind the compensation of top executives in Europe and Asia.
113) __________ is the demand for equal pay for jobs requiring similar levels of education, training, and skill. A) Affirmative action B) Compensation by objectives C) Just distribution D) Comparable worth
114)
Based on the standards of pay equity, comparisons show that women’s jobs tend to A) pay less than men’s. B) be in highly skilled fields. C) require more education to be successful. D) be disproportionately part-time.
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115) Today, women earn close to __________ of what men earn, though the disparity varies considerably by profession and the level of education. A) 25 percent B) 50 percent C) 80 percent D) 90 percent
116) __________ refers to unwelcome sexual advances, requests for sexual favors, and other unsolicited conduct of a sexual nature. A) Sexual harassment B) Gender bias C) Sexual opportunism D) Sexual coercion
117)
Sexual harassment laws apply
A) only to situations in which men make unwelcome advances to women. B) exclusively in states that have enacted right-to-work laws. C) to the conduct of women as well as men. D) strictly in situations in which a person must submit to unwanted advances in order to keep their job.
118) __________ sexual harassment refers to situations in which an employee's submission to unwanted conduct is made either explicitly or implicitly a term or condition of employment or is used to influence employment decisions affecting the worker's job status.
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A) Quid pro quo B) Post hoc C) Contingent D) Reflexive
119) Harassment that creates an intimidating or offensive work environment falls under the type of sexual harassment known as a(n) A) hostile work environment. B) quid pro quo. C) extroverted harassment. D) de jure harassment.
120)
Small businesses have found that child care programs
A) are too expensive to offer, which puts them at a serious disadvantage when competing against larger firms to attract the best workers. B) can be offered in creative ways that enable the firm to offer an attractive benefit to workers with young children. C) are less necessary now than they were before the federal government expanded its child care programs. D) are not very expensive, but tend to be more trouble than they are worth.
121) As the workforce of the United States ages, a greater percentage of workers will have to concern themselves with A) finding care for their children. B) caring for older relatives. C) the educational benefits of downsizing. D) transportation issues.
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122) It is estimated that firms lose __________ annually in productivity, absenteeism, and employee turnover due to caring for aging parents. A) $42 million B) $10 thousand C) $34 billion D) very little
123) Drug problems among workers is costing the U.S. economy upwards of __________ annually in lost work, health care costs, and even crime and accidents. A) $100 million B) $50 billion C) $820 billion D) $50 thousand
124) The National Institute of Health estimates that each drug abuser can cost an employer approximately __________ annually. A) $500 B) $1,000 C) $5,000 D) $10,000
125)
What is an effective way to deal with the growing threat of workplace violence?
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A) Ignore it, as the amount of workplace violence has actually decreased substantially. B) Hire proactive managers. C) Ask employees that are experiencing threats or harassment to take paid leave. D) Avoid disciplining employees who are not performing up to par since they will learn on the job and their performance will improve over time.
126) The issue of college athlete compensation is discussed in the “Playing for Dollars or Degrees” box. Under current law, what entity controls this controversial issue? A) the U.S. Department of Labor B) the individual college or university C) the National Collegiate Athletic Association (NCAA) D) the state in which the college or university is located
127)
Workplace bullying tends to focus on abuse that is __________ in nature. A) biological B) psychological C) social D) physical
128)
What is likely to remain a controversial labor-management issue in the future? A) the use of yellow-dog contracts B) enforcement of the Taft-Hartley Act C) sexual harassment D) a resurgence of the Knights of Labor
129)
The social partnerships in place in Germany are beneficial because
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A) they create a board consisting of members of the public and those not associated with the firm. B) they allow workers a say in company management. C) they eliminate the need for arbitration. D) they promote strikes and boycotts to minimize company power.
130) In Germany, there are some firms whose employees participate in the company decisions by actually serving as members of the board of directors. The policy of permitting nonmanagement employees to participate in the decision-making processes of some European companies is called A) cohabitating. B) co-determination. C) team management. D) dual management.
131)
Comparable worth is primarily concerned with
A) ensuring equal pay for men and women who work for the same firm and have the same job title. B) reducing the gap between pay for executives and the pay for nonmanagerial employees. C) ensuring equal pay for jobs requiring similar levels of skill, education, and training. D) determining whether men or women are better suited to perform various jobs.
132) Which statement about drug users is a claim made by the National Institute on Drug Abuse?
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A) If you drink a lot of alcohol, you also abuse drugs. B) Drug users typically cost their company more in health and workman's comp claims. C) Drug users are (overall) friendlier people because they do not take much seriously, including their jobs. D) There is a strong correlation between drug abuse and sexual harassment.
133)
An assessment of elder care needs in the United States suggests that
A) most firms have done a better job in responding to the need for elder care than they have in dealing with the need for child care. B) employees who must care for elderly parents are often in positions that are more critical to the firm's success than workers with concerns about child care. C) although an increasing number of employees must find ways to care for elderly parents, fewer firms will need to offer elder care than child care because the federal government already provides a great deal of assistance to the elderly. D) while an issue for some workers, at the present time elder care is not a high-profile item for most businesses.
134)
Which statement about the costs of elder care is most accurate?
A) It should be much less expensive for firms to provide elder care than for them to provide child care. B) The financial burdens of elder care on the children of aging parents are likely to become less serious in the future than they are today because many senior citizens are now remaining employed into their 70s rather than retiring in their early 60s. C) Although elder care is expensive, the good news is that companies can receive a great deal of assistance from the federal government when they establish qualified elder care programs. D) The costs of elder care to companies will rise higher in coming years as an increasing number of more experienced and high-ranking employees face the need to care for aging parents and other relatives.
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135)
Which statement about sexual harassment is most accurate?
A) Only men can be charged with sexual harassment. B) Sexual harassment cannot be proven unless the employee's submission to such conduct was made explicitly a term of employment or was used to influence the results of the employee's performance appraisal. C) One flaw with current sexual harassment laws are that they do not take into account the possibility of same-sex harassment. D) In evaluating charges of sexual harassment, the courts place a great deal of emphasis on whether the behavior was unwelcome.
136) QuickStart Cereal Company recently launched a program to evaluate the relative levels of skills, education, and training needed to perform various jobs. Based on the results of this evaluation, QuickStart intends to adjust pay scales so that jobs requiring similar levels of skills, abilities, and education will receive similar pay. QuickStart Cereal’s program is an attempt to deal with the issue of A) comparable worth. B) affirmative action. C) reverse discrimination. D) equal employment opportunities.
137) As an employee of the human resource department of a major corporation, you are concerned about the potential costs of drug abuse. You are contemplating testing employees for substance abuse. Before adopting such tests, you should know that A) this type of testing has been found to be illegal, but many firms do it anyway. B) medical tests of this nature are not very accurate. C) if you use these tests, your company will join over 60 percent of major companies that test workers and job applicants. D) these tests are very expensive, and should only be given to those who may belong to groups judged to be at higher risk.
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138) Noah Reynolds is a researcher studying the effects of alcohol and drug abuse. The alcohol center where he works states, "Our mission is to conduct, coordinate, and promote basic and clinical research on the causes, prevention, and treatment of alcoholism and alcoholic disease." Looking forward, which statement are you likely to agree with? A) Noah’s work, although impressive, will not have any short-term or long-term effect on the cost of labor in the United States. B) The United States has seen significant declines in alcohol and drug-related issues in the workplace. Noah would better serve the business world by working on cancer-caused ailments. C) Illegal drug use is more of a problem than alcohol in terms of the number of workrelated accidents that these problems cause. Noah should know, though, that the baby boomers are the major drug users, and they are retiring. D) Noah’s work is greatly needed by business and industry. Alcohol and drug use continue to be on the rise and present serious work-related costs to businesses across almost all industries.
139) Next Flight Airlines implemented a program to curb workplace violence before it occurs. Under this program, the employees of Next Flight can expect to A) share in any profits their airline earns. B) get paid extended leave if they become especially and visibly angry at work. C) see much more use of contingent workers. D) take part in focus groups to share their ideas about workplace violence prevention.
140) As an advisor to a company setting up its sexual harassment policy, which tactic would you suggest?
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A) Immediately making a sexual harassment claim public to every employee in the company. B) Asking the accuser and the accused to sit down, face to face, and participate in a verbal discussion about what has occurred. C) Make certain that there is a communication chain in place to immediately inform board members and executives of the accusation, to keep the information from being leaked to the news media. D) Setting up a proactive grievance procedure for quick action if and when there is an accusation of sexual harassment.
141) Last year, a retired schoolteacher moved her parents from Michigan to northern Illinois to live with her. For the past year, she was traveling two times each month to provide care for this 86-year-old couple, including coordinating medical services and meals. In conversations with her family members, the teacher remarked, "If I were not already retired, I would have to quit my job to continue this way!" This retired teacher A) is in an unusual situation because there are more persons entering the workforce with child care issues than with taking care of aging relatives. B) is like a growing number of families whose households are caring for aging parents and relatives. C) will benefit by all the affordable elder care facilities that cost about $20,000 per year. D) should be advised that Medicare and Medicaid cover all medical expenses for persons 65 years and older, so she should not experience any financial burden.
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142) The workers at Endrun Corporation are not affiliated with a union. Until recently, the workers felt they were well paid and treated fairly by the company, so they had little interest in seeking union representation. However, worker morale at Endrun has declined steadily since the board of directors fired the old CEO last year and replaced him with Ty Runt, a no-nonsense, autocratic manager with a reputation for cutting costs. As soon as he took over, Ty fired other members of the old top management team and replaced them with people who shared his views. Together, the new management team made a series of moves that did not sit well with Endrun's workers. First, they announced changes in work procedures designed to speed up the production line. Many workers complained that the new methods cut corners and were unsafe, but management refused to listen. A few months after changing work methods, the company told workers that it was reducing their health benefits. This led to even greater worker unrest. Finally, just a few weeks ago, workers received word that the wages of all production-line employees would be cut by 6 percent. Many employees felt this was the last straw, especially since the company's board of directors recently approved big salary increases and more lucrative stock option plans for Ty and his management team. A spokesperson for the board explained that the raises were justified because of the management team's "outstanding efforts to reduce costs, increase productivity, and improve the company's profits." Several disgruntled employees, led by Ima Striker and Boyd Cotter, now believe it is time to obtain union representation. Top managers at the company have hinted that workers who actively participate in the union campaign may be among the first workers laid off if the company decides to downsize. Ima and Boyd are not intimidated by these management threats. "I wish we didn't have to do this," Ima recently told many of her fellow workers at the plant. "But someone has to stop Ty Runt and his team from ruining our jobs."
142.1) Ima, Boyd, and their fellow employees at Endrun work on an assembly line and do not have a specialized skill. If they are successful in their quest to set up a union, they would probably be represented by a(n) __________ union. A) craft B) industrial C) freelance D) traditional
142.2) The steps Ima, Boyd, and their fellow workers must take to get the union legally recognized as the authorized bargaining agent are parts of the __________ process.
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A) accreditation B) arbitration C) certification D) collective bargaining
142.3) After gaining union representation, any workers with complaints regarding promotions, layoffs, and job assignments will file a(n) __________ with their shop steward. A) grievance B) arbitration request C) injunction D) yellow-dog contract
142.4) The plant where Ima and Boyd work is located in Illinois, which does not have a right-to-work law. If the workers approve the union as their bargaining agent, Boyd wants to get the greatest union membership that is legally possible. Boyd is likely to push for a(n) A) closed shop. B) agency shop. C) union shop. D) sweatshop.
142.5) Ty Runt has always taken a hard line against unionization efforts. Two years ago, when workers at his previous company tried to obtain union representation, the company closed the plant and refused to let employees work until they abandoned their efforts to form a union. This management tactic is called a(n)
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A) management strike. B) secondary boycott. C) injunction. D) lockout.
142.6) If management tries to threaten or punish Ima and Boyd for their efforts to gain union representation, the two workers could ask the __________ to investigate these unfair labor practices. A) National Labor Relations Board B) Bureau of Labor-Management Relations C) Department of Justice D) Federal Trade Commission
143) Throughout most of U.S. history, the relationship between managers and employees has been trouble-free. ⊚ true ⊚ false
144) Historically, managers were less concerned about productivity and more concerned with friendly relations among employees. ⊚ true ⊚ false
145)
One of the things that labor is interested in is fairness. ⊚ true ⊚ false
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146) A union is an employee organization that has the main goal of representing its members in employee-management negotiation concerning job-related issues. ⊚ true ⊚ false
147) One of the main issues labor unions are focused on is receiving a reasonable share of the wealth generated by its work. ⊚ true ⊚ false
148) Labor unions played a major role in establishing minimum wage laws, child-labor laws, and improvements in job safety. ⊚ true ⊚ false
149) Today labor unions have seen a revitalization of support and union membership has increased significantly. ⊚ true ⊚ false
150) Most historians view the increase in union membership in the United States as an outgrowth of the transition from an industrial economy to a service economy during the middle part of the 20th century. ⊚ true ⊚ false
151) The presence of formal labor organizations in the United States dates back to the late 1700s. ⊚ true ⊚ false
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152) Even critics of organized labor agree that the inhuman conditions once present in U.S. industry could easily reemerge and unions are necessary to protect workers. ⊚ true ⊚ false
153)
The Knights of Labor was the first truly national labor organization in the United States. ⊚ true ⊚ false
154)
A craft union is an organization of skilled specialists in a particular craft or trade. ⊚ true ⊚ false
155) A union that consists of members who are all skilled specialists in a particular trade is called an industrial guild. ⊚ true ⊚ false
156) The Knights of Labor, the first national labor organization, offered membership to all working people, including employers. ⊚ true ⊚ false
157) Samuel Gompers was the most important leader of the American Federation of Labor during its early years. ⊚ true ⊚ false
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158) The American Federation of Labor (AFL) was initially intended to be a single craft union. ⊚ true ⊚ false
159) During its early years, the AFL tried to expand as rapidly as possible by recruiting both skilled and unskilled workers. ⊚ true ⊚ false
160)
In its early years, the AFL limited its membership to skilled workers. ⊚ true ⊚ false
161)
Membership in industrial unions was strictly limited to skilled craftspeople. ⊚ true ⊚ false
162) John L. Lewis broke with the American Federation of Labor (AFL) in 1935 over membership issues and formed a rival group known as the Congress of Industrial Organizations (CIO). ⊚ true ⊚ false
163) Industrial unions tended to be found in businesses using mass production, such as the automobile industry.
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⊚ ⊚
164)
true false
Today, 55 national and international labor unions are affiliated with the AFL-CIO. ⊚ true ⊚ false
165) For 20 years, the CIO was a major rival of the AFL in the contest for leadership of the labor movement. ⊚ true ⊚ false
166) In 1955, after the passage of the Taft-Hartley Act, the AFL and CIO merged to create the AFL-CIO. ⊚ true ⊚ false
167) Union membership is likely to rise in the coming decade, because the same economic and political conditions that gave rise to unions in the late 19th and early 20th centuries are now reappearing. ⊚ true ⊚ false
168) A major difference between early labor organizations in the United States and today's labor unions is that the early labor groups often were temporary organizations that disbanded after achieving a short-range goal, while today's unions are permanent organizations. ⊚ true ⊚ false
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169) The Knights of Labor and the American Federation of Labor were actually very similar in their aims, tactics, and membership. The only major difference was in the effectiveness of their leaders. ⊚ true ⊚ false
170) The Industrial Revolution slowed the growth of unions by creating a rapidly rising standard of living for most workers. ⊚ true ⊚ false
171) According to the box “Spotlight on Small Business,” today's labor leaders claim that the tragedy at the Triangle Shirtwaist Company is proof of why labor unions are crucial to maintain workplace balance in the U.S. ⊚ true ⊚ false
172) Frank, an unskilled worker in the 1930s, toiled 10 hours a day on an automotive assembly line. His hours were long, his wages were low, and his working conditions were unsafe and unpleasant. Frank would probably have been more sympathetic to the views of John L. Lewis than to those of Samuel Gompers. ⊚ true ⊚ false
173) The Grove Corporation operates a manufacturing plant in Kinley Park. Semiskilled and unskilled labor work along an assembly line. These employees are looking into obtaining union representation. The type of union they would belong to would be classified as an industrial union.
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⊚ ⊚
true false
174) The Norris–LaGuardia Act made it more difficult for unions to legally recruit new members. ⊚ true ⊚ false
175) A yellow-dog contract required workers to join a union as a condition of their employment. ⊚ true ⊚ false
176) The Norris–LaGuardia Act prohibits firms from requiring workers to agree not to join a union as a condition of their employment. ⊚ true ⊚ false
177) Samuel Gompers believed that collective bargaining was likely to be an ineffective way for unions to achieve their objectives. ⊚ true ⊚ false
178) The National Labor Relations Act (Wagner Act) gave labor the legal justification to pursue collective bargaining and other key labor issues. ⊚ true ⊚ false
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179) The process by which a union is recognized by the NLRB as the authorized bargaining agent for a group of workers is called collective bargaining. ⊚ true ⊚ false
180) Once a union is certified to represent a group of workers, decertification enables workers to take away the union’s right to represent them. ⊚ true ⊚ false
181) Collective bargaining is the process whereby union and management representatives negotiate a labor-management contract for workers. ⊚ true ⊚ false
182) The National Labor Relations Act (Wagner Act) established the first minimum wage for workers. ⊚ true ⊚ false
183) One goal of the Labor-Management Reporting and Disclosure Act (Landrum-Griffin Act) was to clean up union corruption. ⊚ true ⊚ false
184) The Norris-LaGuardia Act prohibited courts from issuing injunctions against nonviolent union activities.
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⊚ ⊚
true false
185) The National Labor Relations Act (Wagner Act) gave employees the right to form and join labor organizations and the right to engage in activities such as strikes and boycotts. ⊚ true ⊚ false
186) The Labor-Management Relations Act (Taft-Hartley Act) strengthened unions by giving them the right to engage in featherbedding and secondary boycotts. ⊚ true ⊚ false
187) The Labor-Management Relations Act (Taft-Hartley Act) prevented states from restricting compulsory union membership. ⊚ true ⊚ false
188) The Labor-Management Relations Act (Taft-Hartley Act) gave more power to management. ⊚ true ⊚ false
189) Under the National Labor Relations Act (Wagner Act), the National Labor Relations Board can establish a labor union in an organization if it finds evidence of substantial labor abuse within that organization. ⊚ true ⊚ false
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190) The National Labor Relations Board (NLRB) is an offshoot of the Norris-LaGuardia Act of 1932. ⊚ true ⊚ false
191) The union and company have just six months to contest union authorization results with the NLRB. ⊚ true ⊚ false
192) Lillian is negotiating with management as a member of a union team. The union wants to obtain a labor contract for the workers represented by the union. Lillian is involved in contract arbitration. ⊚ true ⊚ false
193) During an interview with a Petrie Group company representative, Lois was told that Petrie Group faces intense competition and management believes that the only way the company can survive is to have a nonunion workforce. Therefore, all workers the company hires must sign an employment contract stating that they agree to not join a union while they work for Petrie Group. This requirement is illegal in the United States. ⊚ true ⊚ false
194) The workers at the Morris Company are unhappy with the way they have been represented by their union. The National Labor Relations Act (Wagner Act) allows these workers to take away the union's right to represent them through a process known as decertification. ⊚ true ⊚ false
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195) Christian remembers his grandfather telling him about going to work at 16 years of age in the coal mines of West Virginia. In order to get the job, he had to agree to a yellow-dog contract. Essentially this meant he would only get the job if he agreed to not join a union. ⊚ true ⊚ false
196) The main objectives of organized labor, better wages, and shorter hours have remained remarkably stable over time. ⊚ true ⊚ false
197) Wage rates, hours of work, employee benefits, and job rights and seniority are issues covered in a typical negotiated labor-management agreement. ⊚ true ⊚ false
198) A union security clause in a labor-management agreement stipulates that employees who benefit from a union must either officially join or at least pay dues to the union. ⊚ true ⊚ false
199) The negotiated labor-management agreement clarifies the terms and conditions under which labor and management agree to function over a specified period of time. ⊚ true ⊚ false
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200) Under a closed shop agreement, workers must agree to not join a union in order to keep their jobs. ⊚ true ⊚ false
201) Until passage of the Taft-Hartley Act, under a closed shop agreement, a company could only hire workers who already belonged to a union. ⊚ true ⊚ false
202)
Under a union shop agreement, workers must belong to a union before they can be hired. ⊚ true ⊚ false
203)
The Taft-Hartley Act made the union shop agreement illegal in all states. ⊚ true ⊚ false
204)
A union shop agreement is illegal in states that have passed right-to-work laws. ⊚ true ⊚ false
205)
In an agency shop agreement, all workers are required to join the union. ⊚ true ⊚ false
206) Under an agency shop agreement, only union members are represented at the bargaining table.
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⊚ ⊚
true false
207) Under an open shop agreement, workers have the option to join or not join a union if one is present in the workplace. ⊚ true ⊚ false
208) A grievance is a charge by managers that the union is not abiding by the terms of the negotiated labor-management agreement. ⊚ true ⊚ false
209) The sources of many grievances include overtime rules, promotions, layoffs, and job assignments. ⊚ true ⊚ false
210) The vast majority of grievances filed by union members are negotiated and resolved by shop stewards and supervisory managers. ⊚ true ⊚ false
211) A bargaining zone is the time period during which a third party is used to reach agreement on union disputes. ⊚ true ⊚ false
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212)
In contract negotiations, the mediator is typically the union president. ⊚ true ⊚ false
213) Arbitration is an agreement to bring in an impartial third party to render a binding decision in a labor dispute. ⊚ true ⊚ false
214) Many of the negotiated labor-management agreements in the United States call for the use of an arbitrator to end labor disputes. ⊚ true ⊚ false
215) Arbitration and mediation are alike in that both involve an impartial third party to help in the negotiation process. The differences in these two approaches is that an arbitrator's decision is binding and both parties agree to this on the front end; a mediator encourages the two conflicting parties to continue to negotiate and may make suggestions in pursuit of a resolution. ⊚ true ⊚ false
216) In the past, a variety of professionals have served as mediators. If a labor dispute were to break out between the management at an auto manufacturer and the local union that represents workers at the auto manufacturing plant, it would be highly unusual for a university professor who has studied labor relations to be asked to mediate. ⊚ true ⊚ false
217)
All states in the United States have passed right-to-work laws.
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⊚ ⊚
true false
218) Margo was recently hired to work at a production plant at Jensen Manufacturing. Upon her hiring, she was told she must join the union within 90 days in order to keep her job. Margo is employed in an agency shop. ⊚ true ⊚ false
219) Kit works for a company in which a union is recognized as the bargaining agent for the workers who perform her type of job. However, under the arrangements at her company, Kit is not required to join the union, nor is she required to pay any fees or dues to the union. Kit works under a union shop agreement. ⊚ true ⊚ false
220) Trevor works for a company under an open shop agreement. Under this type of arrangement, Trevor is not required to join the union. ⊚ true ⊚ false
221) At the Carolina Company, labor and management have reached a stalemate in their efforts to negotiate an acceptable labor-management agreement. The two sides have agreed to bring in an arbitrator. If the arbitrator issues a ruling that the union does not like, it can still reject the decision. ⊚ true ⊚ false
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222) Over the years, Olivia has acted in a number of supporting roles on TV sitcoms. Her last contract obligated her to perform in 22 episodes for a stipend of $500 per episode. Upon completion of the 11th episode, Olivia broke her leg and was not able to complete the episodes in a timely manner. The studio claimed that she broke her contract and they are not obligated to pay her for any work. Olivia is confident that an impartial third party will view her circumstances as exceptional and will rule that she be reimbursed for the 11 performances. She has agreed to mediation. ⊚ true ⊚ false
223) Andrea was recently asked by representatives of labor and management at a nearby corporation to help resolve a disagreement that threatened to cause a breakdown in negotiations. If Andrea agrees to help, her role will be to encourage both parties to continue negotiating and to offer constructive advice and suggestions, but she will not have the authority to render a binding decision. Andrea’s role is that of a mediator. ⊚ true ⊚ false
224) Management at Forth Enterprises has assigned Matthew to work at two different facilities, which will require him to commute an extra 25 miles on the days he must work at both plants. Matthew believes that the negotiated labor-management agreement requires the company to reimburse him for the extra mileage he has to drive. Management disagrees. Matthew has decided to file a charge that management is not abiding by the terms of the negotiated agreement. His complaint is called a grievance. ⊚ true ⊚ false
225)
A lockout is a tactic utilized by unions when collective bargaining breaks down. ⊚ true ⊚ false
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226) The strike has historically been the most powerful weapon unions use to achieve their objectives in labor disputes. ⊚ true ⊚ false
227)
A boycott occurs when workers collectively refuse to go to work. ⊚ true ⊚ false
228) Strikes have been an effective way of settling labor disputes without violence and bitterness. ⊚ true ⊚ false
229) Postal workers and other employees of the federal government who provide important services are allowed to form unions, but are denied the right to strike. ⊚ true ⊚ false
230) The "blue flu" refers to a situation in which union members (such as police and firefighters) who are not allowed to strike refuse to work by calling in sick. ⊚ true ⊚ false
231) A cooling-off period is when workers in a critical industry refuse to do their jobs until contract negotiations are settled. ⊚ true ⊚ false
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232) In a primary boycott, a union encourages its members and the general public not to buy the goods and services produced by a firm involved in a labor dispute. ⊚ true ⊚ false
233)
In 2013, the U.S. Supreme Court ruled that primary boycotts are illegal. ⊚ true ⊚ false
234) Tactics used by management when collective bargaining breaks down include injunctions and lockouts. ⊚ true ⊚ false
235) The most potent weapon currently available to management when collective bargaining breaks down is the use of yellow-dog contracts. ⊚ true ⊚ false
236)
The Supreme Court ruled in 1938 that employers had the right to hire strikebreakers. ⊚ true ⊚ false
237)
A common tactic of management in labor disputes is the use of secondary boycotts. ⊚ true ⊚ false
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238) The use of strikebreakers has helped ease the tension between union members and the corporation during a strike. ⊚ true ⊚ false
239) Workers who are hired to do the jobs of striking workers until the strike is over are often called "scabs" by the union. ⊚ true ⊚ false
240) A court order directing someone to do something or to refrain from doing something is called collective bargaining. ⊚ true ⊚ false
241) Hiring strikebreakers to replace striking workers was historically a common management tactic during labor disputes, but it is seldom used today. ⊚ true ⊚ false
242) The Taft-Hartley Act authorizes the U.S. president to ask for a cooling-off period to temporarily prevent a strike in a critical industry. ⊚ true ⊚ false
243) Courts will issue an injunction against union tactics only if management can show a just cause to restrict the union tactic.
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⊚ ⊚
true false
244) The lockout is the most common tactic used by management today to deal with labor management disputes. ⊚ true ⊚ false
245) The largest labor organization in theUnited States is the National Education Association (NEA). ⊚ true ⊚ false
246)
Membership in labor unions has grown steadily over the past 50 years. ⊚ true ⊚ false
247)
The unions of the 21st century are likely to be quite different from those in the past. ⊚ true ⊚ false
248)
The greatest number of people in unions today are in the18- to 25-year age category. ⊚ true ⊚ false
249) In the next few years, unions are likely to find that they must adopt a tough, confrontational approach in order to get what they want from management.
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⊚ ⊚
true false
250) The Taft-Hartley Act gives the president the power to require striking workers in any industry to return to their jobs for a cooling-off period while representatives of management and the union continue to negotiate. ⊚ true ⊚ false
251) Union representatives and the management at Spring Bottling Company have reached an impasse. Going forward, the union is planning an organized strike and other tactics to put pressure on management. Union supporters are being encouraged to avoid purchasing Spring Bottling’s products. Now union leaders have contacted a variety of stores that stock the company’s soda and sports drinks, telling them that union members and other supporters will stop shopping at any store that continues to carry Spring Bottling’s products until the dispute is resolved in the union's favor. This tactic against stores that carry Spring Bottling Company products is called a primary boycott. ⊚ true ⊚ false
252) Striking union workers are picketing near the entrance of the Sport-Fit Shoe plant. The workers are acting peacefully and have not threatened anyone entering or leaving the company or damaged any property. Sport-Fit Shoe’s management is seeking an injunction to prevent the workers from picketing. The courts are unlikely to issue an injunction under the current circumstances. ⊚ true ⊚ false
253) Workers at Findley EnvironmentalCorp. have gone on strike. Management believes it could continue operations as normal by hiring replacement workers. If the company hires nonunion workers to continue its operations, it will be violating a recent Supreme Court ruling that declared hiring replacement workers as a violation of the Wagner Act.
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⊚ ⊚
true false
254) Last year, employees at a community college went on strike. Postal employees refused to deliver mail to the college, claiming they were honoring the strike for their fellow service union members. The postal employees were participating in a voluntary secondary boycott. ⊚ true ⊚ false
255) After adjusting for inflation, the average executive compensation is actually a little lower now than it was in 1960. ⊚ true ⊚ false
256) The disparity in salaries is clearly reflected in the fact that the average executive compensation for a major company in 2019 was $17.2 million, compared to about $56,000 that the average worker received. ⊚ true ⊚ false
257)
CEOs only earn high salaries and bonuses when their companies earn substantial profits. ⊚ true ⊚ false
258) Economist Thomas Piketty advocates that the exorbitant compensations that some CEOs are getting is justified. ⊚ true ⊚ false
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259) Despite their high pay, most CEOs work far fewer hours per week than the average employee in their company. ⊚ true ⊚ false
260) On the average, today's CEO of a Fortune 500 company makes over 287 times the average salary of workers in the same company. ⊚ true ⊚ false
261) The Dodd-Frank Wall Street Reform and Consumer Protection Act was intended to give shareholders more say in executive compensation. ⊚ true ⊚ false
262) Comparable worth is concerned with making sure that employees receive a justified amount of the profits in comparison with the executives. ⊚ true ⊚ false
263) The Equal Pay Act of 1963 required companies to provide equal pay to men and women who perform the same job. ⊚ true ⊚ false
264) The concept of comparable worth holds that people who do jobs that require similar levels of education, training, and skills should receive equal pay.
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⊚ ⊚
true false
265)
Today, women are compensated at roughly 80 percent of what men earn. ⊚ true ⊚ false
266)
The law protects both women and men from sexual harassment. ⊚ true ⊚ false
267) In 1997, the Supreme Court ruled that same-sex harassment is prohibited by sexual harassment laws. ⊚ true ⊚ false
268) Although workers and managers often know that their firm has a policy against sexual harassment, they seldom have a clear understanding of what the policy actually says. ⊚ true ⊚ false
269) Quid pro quo sexual harassment occurs when a person's conduct creates an offensive, hostile, or intimidating work environment that adversely affects the job performance of some other employee. ⊚ true ⊚ false
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270) Because of decreased employee interest, most large companies have eliminated their child care benefits. ⊚ true ⊚ false
271) Small firms often offer innovative child care programs as a way of competing for qualified employees. ⊚ true ⊚ false
272) On-site childcare remains the only acceptable way for firms to meet the child care concerns of their employees. ⊚ true ⊚ false
273) The number of households that face the burden of caring for one or more elderly parents has increased significantly and is expected to continue growing over the next 20 years. ⊚ true ⊚ false
274) In recent years federal programs such as Medicare and Medicaid have greatly reduced the financial burden on families faced with caring for elderly adults. ⊚ true ⊚ false
275) Costs associated with elder care have a much smaller impact on businesses than childcare costs. ⊚ true ⊚ false
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276)
Elder care costs are likely to remain a major issue for businesses for many years. ⊚ true ⊚ false
277) Alcohol and drug abuse are serious workplace issues, but they involve few workers so are not taken seriously by experts. ⊚ true ⊚ false
278)
Alcohol is the most widely used drug in the workplace. ⊚ true ⊚ false
279)
Today, over 60 percent of major companies require some type of drug testing. ⊚ true ⊚ false
280) The high cost of illegal drug use in the workplace has resulted in a rise in the number of firms that test employees and job applicants for drugs. ⊚ true ⊚ false
281) According to the Occupational Safety and Health Administration (OSHA), 9 percent of job-related fatalities are homicides. ⊚ true ⊚ false
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282)
Close to 20 percent of women's deaths in the workplace are from homicides. ⊚ true ⊚ false
283) While measures have been taken to curtail workplace violence, workplace bullying is increasing. ⊚ true ⊚ false
284) Since violence in the workplace rarely results in severe injury, it is likely not to be much of a problem in the future. ⊚ true ⊚ false
285) According to the Workplace Bullying Institute, instances of workplace bullying are almost four times the incidents of sexual harassment on the job. ⊚ true ⊚ false
286) Although child care concerns have become a pressing issue for many employees, most firms have been unable to find acceptable solutions to these concerns. ⊚ true ⊚ false
287) According to the box “Adapting to Change,” college athletes are not permitted to be paid a salary or receive gifts for their efforts on the field or court.
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⊚ ⊚
true false
288) Rachel discovered that a male coworker at the hospital where they both work is paid $1.50 per hour more than she is even though they have the same job title, have similar qualifications, and have been employed the same length of time. Unfortunately for Rachel, it is legal for the hospital to pay different salaries to different workers who perform the same job. ⊚ true ⊚ false
289) Often flirting with each other at work, Neal and Elyse both view their actions as harmless fun, as do the other employees in their office. Their flirtation does not offend the other workers or make them feel threatened or uncomfortable. Nevertheless, under current criteria, both Neal and Elyse could be found guilty of sexual harassment. ⊚ true ⊚ false
290) Brenda’s company, where she is a human resources manager, recently hired 100 new workers, 10 of whom were involved in workplace accidents soon after they were hired. It was determined that alcohol use was the cause of these accidents. Top management has asked Brenda to do a better job in screening potential workers for alcohol abuse. They based their request on the fact that a significant percentage of industrial injuries and fatalities can be linked to alcohol consumption. Brenda can verify this statistic if she does some research. ⊚ true ⊚ false
291) Recently a disgruntled employee walked into a large grocery chain's Midwest distribution center and held six fellow workers at gunpoint. He injured several people before being restrained by the police. The grocery chain is very concerned about the threat of workplace violence in the future. One way to deal with this threat is for management to hold focus groups to invite employee input. Another way is to make certain that the company hires managers with good interpersonal skills.
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⊚ ⊚
true false
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Answer Key Test name: chapter 12 6) B 7) A 8) C 9) C 10) D 11) A 12) A 13) C 14) B 15) D 16) A 17) B 18) C 19) D 20) C 21) A 22) C 23) C 24) B 25) A 26) C 27) C 28) B 29) A 30) D 31) A
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32) B 33) B 34) D 35) C 36) A 37) D 38) B 39) B 40) D 41) B 42) D 43) C 44) A 45) B 46) D 47) D 48) A 49) A 50) B 51) A 52) B 53) C 54) B 55) A 56) C 57) D 58) B 59) D 60) A 61) B
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62) A 63) B 64) C 65) C 66) B 67) A 68) C 69) C 70) B 71) D 72) B 73) D 74) A 75) B 76) B 77) D 78) D 79) B 80) C 81) C 82) D 83) A 84) C 85) B 86) A 87) B 88) A 89) D 90) C 91) B
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92) D 93) D 94) C 95) B 96) A 97) B 98) C 99) B 100) B 101) B 102) D 103) B 104) B 105) B 106) D 107) C 108) C 109) C 110) C 111) D 112) C 113) D 114) A 115) C 116) A 117) C 118) A 119) A 120) B 121) B
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122) C 123) C 124) D 125) B 126) C 127) B 128) C 129) B 130) B 131) C 132) B 133) B 134) D 135) D 136) A 137) C 138) D 139) D 140) D 141) B 142) Section Break 142.1) B 142.2) C 142.3) A 142.4) C 142.5) D 142.6) A 143) FALSE 144) FALSE 145) TRUE
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146) TRUE 147) TRUE 148) TRUE 149) FALSE 150) FALSE 151) TRUE 152) FALSE 153) TRUE 154) TRUE 155) FALSE 156) TRUE 157) TRUE 158) FALSE 159) FALSE 160) TRUE 161) FALSE 162) TRUE 163) TRUE 164) TRUE 165) TRUE 166) TRUE 167) FALSE 168) TRUE 169) FALSE 170) FALSE 171) TRUE 172) TRUE 173) TRUE 174) FALSE 175) FALSE
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176) TRUE 177) FALSE 178) TRUE 179) FALSE 180) TRUE 181) TRUE 182) FALSE 183) TRUE 184) TRUE 185) TRUE 186) FALSE 187) FALSE 188) TRUE 189) FALSE 190) FALSE 191) FALSE 192) FALSE 193) TRUE 194) TRUE 195) TRUE 196) FALSE 197) TRUE 198) TRUE 199) TRUE 200) FALSE 201) TRUE 202) FALSE 203) FALSE 204) TRUE 205) FALSE
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206) FALSE 207) TRUE 208) FALSE 209) TRUE 210) TRUE 211) FALSE 212) FALSE 213) TRUE 214) TRUE 215) TRUE 216) FALSE 217) FALSE 218) FALSE 219) FALSE 220) TRUE 221) FALSE 222) FALSE 223) TRUE 224) TRUE 225) FALSE 226) TRUE 227) FALSE 228) FALSE 229) TRUE 230) TRUE 231) FALSE 232) TRUE 233) FALSE 234) TRUE 235) FALSE
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236) TRUE 237) FALSE 238) FALSE 239) TRUE 240) FALSE 241) FALSE 242) TRUE 243) TRUE 244) FALSE 245) TRUE 246) FALSE 247) TRUE 248) FALSE 249) FALSE 250) FALSE 251) FALSE 252) TRUE 253) FALSE 254) TRUE 255) FALSE 256) TRUE 257) FALSE 258) FALSE 259) FALSE 260) TRUE 261) TRUE 262) FALSE 263) TRUE 264) TRUE 265) TRUE
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266) TRUE 267) TRUE 268) TRUE 269) FALSE 270) FALSE 271) TRUE 272) FALSE 273) TRUE 274) FALSE 275) FALSE 276) TRUE 277) FALSE 278) TRUE 279) TRUE 280) TRUE 281) TRUE 282) TRUE 283) TRUE 284) FALSE 285) TRUE 286) FALSE 287) TRUE 288) FALSE 289) FALSE 290) TRUE 291) TRUE Student name:__________ 1)
Describe the steps involved in the marketing process.
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2) Why is market segmentation important? Describe three ways firms can segment consumer markets.
3) Marketing is different in B2B markets than in consumer markets. Identify and explain three differences between the business-to-business market and the consumer market.
4)
Explain how mass marketing and relationship marketing differ.
5)
Describe the steps involved in conducting marketing research.
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6)
Identify and discuss the four eras of the evolution of marketing.
7) __________ is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. A) Selling B) Advertising C) Marketing D) Production
8) Which marketing era refers to the time period from our country's first settlers through the early 1900s? A) production era B) selling era C) marketing era D) customer relationship era
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9) The business philosophy of "produce as much as you can because there is a limitless market" is consistent with which marketing era? A) production era B) selling era C) marketing era D) customer relationship era
10) Which marketing era began in response to the development of mass-production assembly lines? A) production era B) selling era C) marketing era D) customer relationship era
11) During the __________ era, the prevalent business philosophy turned from an emphasis on production to an emphasis on advertising and selling. A) prefabrication B) selling C) communication D) relationship
12) The significant increase in consumer demand following World War II marked the beginning of the A) production era. B) selling era. C) marketing concept era. D) customer relationship era.
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13) The __________ is based on three elements: (1) a customer orientation, (2) a service orientation, and (3) a profit orientation. A) production era B) hierarchy of needs C) relationship approach to marketing D) marketing concept
14) According to the __________ concept, a firm must (1) find out what customers want and provide it, (2) make sure everyone in the organization has customer satisfaction as an objective, and (3) provide goods and services that will earn a profit. A) stakeholder relationship B) consumerism C) marketing D) segmentation
15) Firms that have adopted __________ seek to do more than simply sell a product; they seek to learn as much as possible about their customers in order to satisfy them with goods and services over time. A) nonprofit marketing B) customer relationship management C) management by objectives D) the marketing mix
16) A __________ orientation refers to the process of determining the wants and needs of buyers and then providing goods and services to meet or exceed their expectations.
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A) market B) profit C) customer D) production
17)
What characteristic is a part of the marketing concept? A) a consumer orientation B) avoidance of risk C) limitless markets D) emphasis on efficient production
18)
Which statement is most consistent with today's views on effective marketing? A) "There's a sucker born every minute." B) "Find out what your competition does and do it better." C) "A good promotional campaign can sell anything." D) "Learn about your customers and exceed their expectations."
19) Comparing the business practices of the 1950s to those of today indicates that today's marketing managers A) have a more ambitious goal of not just satisfying customers, but of exceeding their expectations. B) are much more focused on production and mass marketing. C) put less emphasis on earning a profit, since doing so makes it harder to satisfy the needs of the firm's stakeholders. D) operate essentially the same as their predecessors.
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20)
Which statement about marketing is the most accurate?
A) Because nonprofit organizations are not motivated by profit, marketing activities are not consistent with their goals. B) To be successful, marketers must be able to persuade consumers to purchase goods they don't really need. C) Once a product is sold, focus on the next customer. D) Marketers recognize the need to learn as much as possible about customers and do everything possible to satisfy them.
21)
A key element of customer relationship management is to A) keep the price of goods as low as possible. B) develop a strategy to achieve the largest possible market share. C) allow customers to participate in the management decisions of the firm. D) learn as much as possible about customers.
22) A comparison of the marketing concept and customer relationship management indicates that customer relationship management A) and the marketing concept are in fact identical. B) attempts to improve profits by keeping quality high, while the marketing concept attempts to improve profits by a careful design of the promotional mix. C) turns the marketing concept upside down. The marketing concept emphasized that marketing was the most important function performed by a firm, but customer relationship management views management to be the most important function. D) extends the marketing concept by calling for the firm to learn more about its customers so that it not only satisfies them, but exceeds their expectations over time.
23) The box “Adapting to Change” describes how Hallmark has transitioned a major part of its business in response to
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A) the rising price of raw materials. B) changing customer needs. C) production and personnel issues. D) new competitor threats.
24) Swanson Preparatory School places ads in suburban newspapers to encourage graduating eighth graders to visit the campus and consider it for high school. This demonstrates how __________ also use marketing. A) B2B groups B) corporations C) nonprofits D) producers
25) Trevor works as the campaign manager for a candidate for the U.S. Senate. He needs to learn as much as possible about the candidate's potential voters. With the information he digs up, he hopes to focus the campaign on the issues most important to voters. What does this best represent? A) the use of marketing by a nonprofit organization B) a nonprofit application of the production era strategy C) the use of public service advertising to sell a political candidate D) an extension of the profit orientation to a nonprofit organization
26) When Frozen DeLites Ice Cream moved from its longtime storefront to a famous resort area, it took a big risk. However, the owners were confident that its unique ice cream treats would win customer raves. Fortunately, one of the members of the family business was convinced the shop needed to stay in touch with its customers. Frozen DeLites collects names and email addresses of its customers and maintains a presence on a few social media sites in order to send messages about promotions and coupons to valued customers. Marketing professionals refer to this strategy as
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A) niche marketing. B) production management. C) customer relationship management. D) sales management.
27) Which strategy provides an example of a current marketing era, which focuses on exceeding customer expectations? A) At TextTalk International, a smartphone manufacturer, the production line is a 24hour operation, even if demand is low. B) Your Choice Car Sales always maintains a large stock of pre-owned cars at great prices. You can almost always get a car for about 30–40 percent cheaper than at another car sales company, but you buy it "as is," without any warranties. C) Easy Street Bookstore is known for stocking the top ten books on the monthly best sellers list. These books are almost always available at a reasonable cost to the bookstore, and they usually fly off the shelves. Easy Street Bookstore sees this as a win-win situation for themselves and their customers. D) RestWay Hotels is all about the experience. Their goal is to make certain that every guest leaves their properties with a better feeling than when they first arrived. The CEO of RestWay says, "We want you to think of our brand first when you make a hotel reservation."
28) While the four Ps help us remember the basics components of the __________, they don't reveal all the components in the marketing process. A) production operation B) marketing mix C) product development process D) customer relationship marketing process
29) A firm's marketing mix consists of four major components, which are generally referred to as the four
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A) Ps. B) keys. C) intangibles. D) persuaders.
30)
A firm's marketing mix refers to the combination of A) goods the firm offers to different market segments. B) advertising media the firm utilizes to promote its products. C) strategies regarding product, price, place, and promotion. D) people directly involved in making marketing decisions.
31) Marketers define a __________ as any physical good, service, or idea that satisfies a want or need. A) product B) value C) benefit D) concept
32) What identifies a process in which marketers present an accurate description of a new product to potential customers and ask if they find the idea appealing? A) branding B) concept testing C) B2B marketing D) competitive benchmarking
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33) __________ is a process used to test consumer reactions about a product among potential users. A) B2B marketing B) Virtual design C) Prototype D) Test marketing
34) A __________ is a word, letter, or group of words or letters that differentiate the goods and services of a seller from those of competitors. A) brand name B) product designation C) benefit D) niche
35)
The last step in the marketing process often includes A) collecting the cash from sales to consumers. B) setting an appropriate price. C) deciding the best way to distribute the product. D) building relationships with customers.
36) __________ consists of all the techniques sellers use to persuade consumers to buy their goods and services. A) Advertising B) Promotion C) Pre-selling D) Closing
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37)
What would be considered part of a firm's marketing mix? A) Identifying the best source of funds to finance a firm's marketing activities B) Determining the best pricing strategy for a product C) Establishing a production schedule that enables the firm to meet forecasted sales D) Designing the most efficient production plan
38)
Which task would be included in the marketing mix?
A) evaluating various distribution alternatives to determine the best way to get the product to the consumer B) examining various sources of funds to determine the best way to finance an expansion of the organization's production facilities C) assigning tasks to specific workers on specialty product assembly lines D) developing financial statements based on the sales transactions of the firm during a specific time period
39)
What function is part of the marketing process? A) developing an understanding of company finances available for new products B) determining an appropriate brand name for a new product C) designing the most efficient method of production for a new product D) contacting suppliers after a purchase to ensure producer satisfaction
40)
Soleil, a marketing manager for a retailer of lighting products, will likely be involved in A) setting a price for the light fixtures her firm produces. B) deciding the best way to hire new employees to produce the lights. C) developing ideas for new ways to produce the lights. D) determining the best way to finance the purchase of new production equipment.
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41) Geoff developed an idea for a program to help perform real estate appraisals more quickly and accurately. He has a buddy who is a programmer that helped him develop a detailed description of what the program will do and how it differs from existing apps. Now, Geoff has taken this description and shown it to fellow real estate agents to see if his idea appeals to them. What is Geoff engaging in? A) prototype outsourcing B) B2B advertising C) concept testing D) word-of-mouth promotion
42) Nate came up with an idea for a more durable soccer ball and developed a prototype. After setting a price with a reasonable margin, he decided to take special orders and sell the balls directly from his garage. He also promoted the ball with sales calls to professional soccer camps, where players could try out his product. In marketing terms, we recognize that Nate has been determining the factors in the A) marketing concept. B) marketing mix. C) marketing equity. D) marketing distribution.
43) Mountain Stream Inc. designed a water filtration device that is drastically different and far superior to any product currently on the market. Although consumer response was positive to the idea of the new product, management wants to find out more before committing to full-scale production. The next step Mountain Stream’s marketing department is likely to take is to A) locate a low-cost production site. B) seek a joint venture with a larger competitor. C) test market the product among potential users. D) develop an advertising campaign to persuade consumers of the value of the new water purifier system.
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44) Engineers at Cable Corp. Electronics have designed a new smartphone ready to rival iPhone. The marketing department wants to find a way to identify the new phone in the minds of current smartphone consumers and differentiate it from products made by Cable Corporation’s competitors. An important part of this effort is likely to be the selection of a __________ for the new phone. A) merchandiser B) brand name C) copyright D) prototype
45)
Which term involves the analysis of markets to identify opportunities and challenges? A) market analysis B) marketing research C) opportunity identification D) market prospecting
46)
Successful marketing researchers will
A) focus their efforts on determining historical needs of customers, since the core value of marketing is that the customer needs don't change. B) develop as much information as possible from primary sources. C) listen to customers and other stakeholders. D) rely on their experience and personal opinions when making decisions.
47)
The first step in the marketing research process is to
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A) define the problem and determine the present situation. B) collect relevant data from primary and secondary sources. C) analyze the research data. D) decide upon the best ethical solution.
48) A firm gathers __________ data by conducting surveys, interviewing customers, or mailing out questionnaires. A) primary B) secondary C) non-referenced D) unbiased
49) __________ consists of information that has already been researched by others and is published in journals or books or has been made available online. A) Primary data B) Secondary data C) Big data D) Technical data
50)
Exploring __________ data first helps marketers minimize marketing research costs. A) focus group B) personal interview C) primary D) secondary
51)
A widely-used technique for collecting primary data is
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A) collecting relevant articles in trade journals. B) benchmarking. C) conducting a survey. D) reviewing government reports.
52)
What is a technique used to obtain primary data?
A) gaining access to an unpublished government report from the Federal Trade Commission (FTC) B) conducting personal interviews with potential customers C) establishing a database to store and cross-index articles from leading academics and researchers D) reviewing the best-selling trade books and textbooks that present marketing principles
53) A __________ group consists of a small group of people who meet under the direction of a discussion leader to discuss opinions about an organization, its products, or other issues. A) concept B) focus C) peer D) consumer interest
54)
What is a step in the marketing research process? A) designing a product to meet the need based on research B) defining the question and determining the present situation C) planning for product modifications and test advertising D) setting the price for a product
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55) In the past, companies have designed intricate products that markets did not perceive any need for. They have aired promotional campaigns that have offended audiences. They have priced products out of reach of the target market. Marketing experts defend the importance of __________, the process of gathering all sorts of information about customers and products in order to make informed decisions about the product, price, place, and promotion. A) target marketing B) marketing research C) market segmentation D) global trekking
56) Su Casa Taco Restaurants Inc. is a chain of restaurants featuring authentic, affordable Mexican cuisine around the United States. The company is looking to expand its reach and to improve its menu. What is an example of secondary data the owners of Su Casa Taco might find useful? A) information published by the U.S. Census Bureau that identifies U.S. regions experiencing rapid growth in Mexican-American population B) telephone survey by the marketing department of Su Casa Taco asking for opinions about the quality of the food at the restaurants C) focus group of teenagers who like Mexican food who are asked about their reactions to new food dishes the restaurant may offer D) e-mail responses the chain receives to a series of customer satisfaction questions posted on its website
57) Enrollment at Green View Community College has been in decline for five years. In the past the college has relied strictly on enrollment from newly graduated high school students. In order to identify other potential markets, the school would benefit from
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A) test marketing. B) sales promotions. C) marketing research. D) a stakeholder audit.
58) Taylor completed a review of data her department collected. The team contacted potential customers through phone interviews, online surveys, and focus groups. Taylor is disappointed because the results strongly indicate the product idea she helped develop is unlikely to be popular. What should Taylor do? A) Proceed with product development because the opinions of experienced marketing managers often turn out to be more accurate than marketing research. B) Accept the research results and reevaluate the proposed product. C) Continue developing the product but try to find ways to reduce production costs. D) Promote the product to a different group of people than those involved in the research studies.
59) Bubbles and Baubles is preparing to open its newest children’s party site in Tallahassee. Once open, the marketing department will be collecting information on what customers want while they are at an event at the new location. The marketing research team for Bubbles and Baubles will create original surveys with targeted questions to help collect reliable information. This type of research is described by marketing professionals as the collection of A) sequential data. B) formative data. C) primary data. D) secondary data.
60)
__________ is the process of identifying factors that can affect marketing success.
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A) Environmental scanning B) Target marketing C) Niche marketing D) Segmentation analysis
61) The most important technological change likely to affect the marketing success of many firms is the A) growth of consumer databases, blogs, and social networking sites. B) speed of service from faster check-outs. C) level of computer literacy of the target market. D) number of computers in use in the home.
62) One of the social trends that marketers must monitor to maintain their close relationship with customers is the A) increase in the number of competitors servicing the target market. B) number of employees who prefer to work from home. C) number of people who can use computers with proficiency. D) increase in the number of older Americans.
63) People with unsatisfied wants and needs who have both the ability and the willingness to buy are A) a market. B) stockholders. C) a profit center. D) a marketing mix.
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64)
The two major types of markets are the A) primary market and the secondary market. B) B2B market and the C2C market. C) consumer market and the B2B market. D) target market and the niche market.
65) What term identifies individuals that want goods and services for personal consumption and have the resources to buy them? A) secondary market B) business-to-business market C) secondary market D) consumer market
66) The __________ market consists of individuals and organizations that want goods and services in order to produce goods and services or to sell, rent, or supply those goods to others. A) consumer B) B2B C) target D) super
67) The factor that determines whether a product is classified as a consumer product or an industrial product is A) the end use of the product. B) the decision-making process used to purchase the good or service. C) who the buyer represents. D) whether the good is new or used.
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68) Which statement about the distinction between consumer goods and B2B goods is the most accurate? A) The same product can be classified as either a consumer good or an industrial good, depending upon its end use. B) Industrial goods tend to have a useful life of several years and can be depreciated while consumer goods typically last less than a year. C) Consumer goods are typically more expensive than industrial goods. D) Industrial goods are custom-made to the specifications of the buyer, while the all consumer goods are mass-produced.
69)
What is the best example of a market?
A) group of high school students who are tired of cafeteria food and wish they could eat lunch at an expensive restaurant located a few blocks from their campus B) physical facility large enough to accommodate all the people who want to buy or sell a good C) senior citizens willing and able to cruise to the Bahamas D) geographic region targeted by a firm for new promotional efforts
70) According to the box “Spotlight on Small Business,” small businesses can make big money by A) participating in mass production. B) creating a customized experience for buyers. C) shipping products to consumers faster than competitors. D) opening online stores to accompany the already established brick-and-mortar shops.
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71) Roberto is a marketing manager for Inline Services. He has been looking at a variety of factors, such as technological, sociocultural, and economic trends, as well as competitive conditions. Roberto is confident that these factors will impact Inline’s future marketing success. His efforts are an example of A) target marketing. B) competitive benchmarking. C) relationship marketing. D) environmental scanning.
72) Rolling Green Lawncare Inc. has enjoyed growing profits for 10 years. When newproduct development made it feasible for underground sprinkling systems to be installed at a reasonable price, business soared. Recently, through __________, the owner of Rolling Green learned about a grass that only needs to be watered two times each year. This innovation could have serious consequences on healthy revenues and profits. The owner is analyzing the __________ environment in order to remain knowledgeable about new trends that may affect his business. A) environmental scanning; economic B) environmental scanning; technological C) continuous processing; economic D) continuous processing; technological
73) What refers to the process of dividing the total market into several groups with similar characteristics? A) market segmentation B) market differentiation C) market determinants D) market partitioning
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74) __________ marketing is the marketing of products to groups of customers a firm decides it can serve profitably. A) Objective B) Departmentalized C) Target D) Subjective
75) A firm that uses __________ segmentation divides a market into groups based on values, attitudes, or interests. A) demographic B) benefit C) psychographic D) normative
76) A firm that uses __________ segmentation divides a market into groups based on age, income, or level of education. A) demographic B) psychographic C) perceived value D) econometric
77) A firm that uses __________ segmentation divides a market into groups based on life stage, race, or profession. A) benefit B) demographic C) value D) target
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78) __________ marketing involves developing a unique mix of goods and services for each individual customer. A) B2B B) Volume C) Mass D) One-to-one
79) What is a marketing strategy in which the focus is on small but profitable market segments? A) micro targeting B) narrowcast marketing C) one-to-one D) niche marketing
80) A __________ marketing strategy develops products and promotions designed to please large groups of people. A) niche B) mass C) relationship D) value
81) The goal of __________ is to keep individual customers over time by offering them new products that exactly meet their requirements.
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A) niche marketing B) mass marketing C) relationship marketing D) segment marketing
82) Understanding consumers in marketing is considered so important that a whole area of marketing called the study of __________ emerged. A) demographic programming B) consumer behavior C) individual benchmarking D) customer competency
83) One factor that influences the consumer decision-making process is __________, referring to the set of values, attitudes, and ways of doing things passed from one generation to another in a given society. A) cognitive dissonance B) the legal environment C) group behavior D) culture
84) A consumer's decision-making process is influenced by their __________, consisting of those people who help shape the consumer's beliefs, attitudes, values, or behavior. A) reference group B) focus group C) target audience D) social class
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85)
Why would companies use a market segmentation strategy?
A) They can avoid antitrust laws by selecting a small slice of a larger market. B) This strategy allows a company to ship products on demand without having to pay high inventory costs. C) With limited resources, firms can better satisfy the wants and needs of a smaller target market. D) Government regulations require firms to maintain accurate records to show that the firm has not discriminated against a market segment.
86) "Selling to everybody and listening to nobody" might be the result of a firm that uses a __________ marketing strategy. A) niche B) mass C) target D) relationship
87)
Firms that adopt a relationship marketing strategy attempt to
A) develop products that meet the specific requirements of individual customers. B) maximize their market share by designing products that appeal to large numbers of customers. C) develop their promotional efforts utilizing mass media such as television, newspapers, and radio in order to relate to a large audience. D) maximize market share by controlling production costs and maintaining low prices.
88)
What is an aspect of relationship marketing?
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A) mass-produced items that everyone uses B) working with buyers to determine their individual needs C) developing market share through mass media advertising D) focusing more on obtaining new customers than on retaining existing customers
89) a(n)
Firms adopting a relationship marketing strategy view technology and social media as
A) promising technique to expand to a mass market. B) threat to the effective and efficient implementation of their strategy. C) tool with limited value because many people are reluctant to place orders or send information electronically. D) increased opportunity to personalize marketing campaigns to meet customer needs.
90) Contacting customers after a sale to reassure them that they made the right decision is intended to offset A) self-actualization. B) cognitive dissonance. C) mass marketing. D) relationship conflict.
91) Consumer decisions regarding the products they buy are often influenced by their nationality, religion, or ethnic origin. Marketers realize that the consumer decision-making process is impacted by the consumers' A) subcultures. B) four Ps. C) cognitive behaviors. D) market position.
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92)
Which concept is most consistent with a relationship marketing strategy?
A) developing a website that seeks customer feedback and allows customers to communicate with the company B) creating a national advertising campaign using radio and television to increase market share C) designing a promotional campaign to increase cooperation among the firm's suppliers D) distributing goods through limited service discount stores
93) According to the box “Connecting Through Social Media,” although companies like Stitch Fix are utilizing social media and garnering a ton of "likes" and interactions, what issue are they struggling with? A) becoming household names B) getting clicks to their websites C) turning "likes" into followers D) turning "likes" into product subscriptions
94) Beyond the Backyard, a company that designs and manufactures athletic gear, focuses their marketing efforts on people who participate in strenuous outdoor activities such as running, hiking, and climbing. For example, the firm advertises heavily in Runner's World and Women's Running. Beyond the Backyard is using __________ factors to segment its market. A) demographic B) value C) volume D) psychographic
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95) Get ‘n Go Grocery markets some of its products to consumers looking for simple, quick meals. Get ‘n Go also offers another line of products targeted to people interested in low-fat, high-nutrition foods. The company's strategy of dividing the market into groups that want similar things from the products they buy is an example of A) benefit segmentation. B) demographic segmentation. C) volume segmentation. D) cultural segmentation.
96) Shout Magazine focuses its marketing efforts on reaching teen-aged girls interested in fashion and celebrity culture. The firm believes that they are positioned to profitably serve this group of consumers. Shout utilizes the strategy of A) narrowcasting. B) target marketing. C) primary marketing. D) focus group selection.
97)
What scenario best represents an example of demographic segmentation?
A) An outerwear clothing company divides its market into groups by region of the country, designing different products for people in different parts of the country. B) A bike manufacturer offers different types of bikes designed to appeal to different age groups and income levels. C) An entertainment company divides its market according to the attitudes and interests of its customers, marketing some films to people who enjoy action movies and targeting other movies to people who prefer romantic comedies. D) A food company has designed a special line of easy-to-prepare microwavable meals that are low fat and high in fiber to attract people interested in the health benefits of the foods they eat.
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98)
Which action would best benefit the development of niche marketing?
A) decline in the cost of advertising on radio and newspapers enabling firms to more efficiently reach a wide audience B) Supreme Court ruling that limits the market share individual firms in a market are allowed to serve C) growing acceptance of free-trade agreements between nations D) manufacturing improvement enabling firms to more efficiently design and produce specialized products for small groups of consumers
99) Tiny Town Treasures focuses its marketing efforts on high-income buyers of unique miniature items. The firm realizes that the number of buyers in this segment of the collectible market is small. However, they are confident that this approach will be profitable since these buyers will pay premium prices for their unique products and superior customer service. The company’s approach is an example of A) competitive benchmarking. B) niche marketing. C) relationship targeting. D) target positioning.
100) In an effort to increase profits, Southern BBQ Kitchen is attempting to appeal to a specific segment of the market by offering an all-you-can-eat buffet. These efforts, designed to identify specific groups that can be profitably served, represent an example of A) target marketing. B) a focus group. C) benefit segmentation. D) B2B marketing.
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101) After years of using a mass marketing strategy, Lazer Print Shop has responded to new competition from larger companies by focusing on small market segments that have been ignored by these competitors. Lazer believes that by offering these market segments personalized customer service it can attract a loyal group of customers willing to pay premium prices. What is this company’s strategy known as? A) environmental scanning B) niche marketing C) micro-marketing D) demographic segmentation
102) Jon, a marketing manager for Liston Plumbing, is discouraged with the way his organization markets its products. Currently Liston utilizes a strategy aimed toward the largest possible number of people. The company also relies heavily on television and online advertising. Jon protests to management that the company is not listening to its customers and is in danger of losing many of them to firms that create a personal dialogue with their buyers. What does Liston currently practice? A) demographic segmentation B) relationship marketing C) mass marketing D) market segmentation
103) Full Design Car Group manufactures several models to satisfy the different tastes and lifestyles of its customers. Customers who want traditional SUV luxury and leather interiors would prefer the Platinum model. Silver customers might be described as sportier and typically women. Fans of the Bronze model may include a group that is seldom over 30 years of age, typically male, and have often served in the U.S. military. By recognizing differences in its customers and using different characteristics to define its customers, Full Design Car Group is A) segmenting the market. B) practicing one-to-one marketing. C) avoiding cognitive dissonance. D) benchmarking.
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104) Pete and Hollis are forming a new athletic wear company and plan to market their products in the United States. They have decided it will be best to create four different marketing campaigns since each region of the country has unique climates that match up with their clothing. What type of segmentation are they planning to use? A) volume B) geographic C) demographic D) psychographic
105) Eshana found success as an entrepreneur by employing a relationship marketing strategy. The goal of this strategy is to A) use radio and television advertising to attract new customers. B) work closely with existing customers to better satisfy their wants and needs. C) target large market segments of potential customers by working closely with a variety of suppliers. D) communicate to buyers the advantages offered by your firm's low prices and standardized products.
106) Jenna only purchases designer jeans and high-priced stilettos endorsed by her favorite entertainers. On top of that, her attitudes and values are shaped by specific statements made by these celebrities. She also supports causes and charities the celebrities endorse. This illustrates how consumer decision making is influenced by A) marketing mix variables. B) cognitive dissonance. C) a reference group. D) geographic segmentation.
107)
Which scenario is the best example of cognitive dissonance?
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A) Cyrus has been shopping for a new flat screen TV but has not yet made a purchase because he is having trouble deciding which brand to buy. B) Hollis decided to eat at a restaurant she previously avoided after learning several celebrities endorse the restaurant. C) Daveed is torn between going to the movies with friends or staying home and studying for an exam tomorrow. D) Collin just bought an expensive tablet and is already worried that he could have found a better deal if he had shopped more carefully.
108) __________ marketers include manufacturers, intermediaries, institutions, and the government. A) Consumer B) Demographic C) Dissonance D) B2B
109) In terms of the number and dollar volume of transactions, the B2B market is __________ the consumer market. A) larger than B) smaller than C) the same size as D) unrelated to
110)
B2B markets tend to be A) dominated by marketing intermediaries. B) geographically concentrated. C) characterized by the presence of a large number of small buyers. D) more emotional than consumer markets.
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111)
The number of buyers in B2B markets is A) roughly the same as the number of buyers in the consumer market. B) much larger than the number in the consumer market. C) relatively small compared to the consumer market. D) decreasing in comparison with the consumer market.
112)
Compared to consumer markets, B2B markets A) consist of only small and mid-sized firms. B) rely less on relationship marketing. C) rely less on marketing intermediaries. D) tend to be segmented based on demographics.
113)
Which statement about the B2B market is true? A) Promotion efforts are focused mostly on advertising. B) Industrial buyers are usually large. C) Industrial buyers tend to be more emotional in their purchasing decisions. D) The size of the market is smaller than the consumer market.
114) Tina, a sophomore in college, is contemplating majoring in marketing. She asked several friends for advice and their comments are listed below. Which comment is the most accurate and likely to help Tina?
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A) Marketing offers business students a wide array of career options. B) Majoring in marketing rules out a meaningful career with a nonprofit organization. C) You should major in marketing only if you want to work in advertising or personal selling. D) Marketing activities today are essentially the same as they were several decades ago so if you’re looking for change consider a different major.
115) Jorge, after years working with the consumer market, has just been transferred into a new job dealing with buyers in the B2B market. What key difference will Jorge likely notice between consumer markets and B2B markets? A) Businesses focus on developing wants and needs in consumer markets, while firms work to satisfy the existing needs of the B2B market. B) Relationship marketing tends to be much more important in consumer markets than in the business-to-business markets. C) Buyers in the business-to-business markets tend to be more rational than buyers in consumer markets. D) Business-to-business markets make greater use of marketing intermediaries such as wholesalers and retailers than do consumer markets.
116) Leo just moved from a job where he dealt with the consumer market to working as a salesperson in the B2B market. As he considers his new responsibilities, it's likely that Leo will A) find little difference between buyers in the consumer market and those in the business-to-business market. B) discover that decision making in the B2B market requires salespeople to be little more than order takers. C) learn that industrial buyers generally require more personal service than buyers in the consumer market. D) find that B2B buyers tend to purchase more on impulse than consumer buyers.
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117) Briana, a successful executive, is also a cardio queen. For years she worked out at Forever Fitness Gym, the only gym in her small hometown. However, she felt that the environment at Forever Fitness was too masculine, and discovered that her female friends agreed. They disliked the small, smelly locker room, and the limited selection of cardio equipment. Most of them eventually quit going to Forever Fitness. Briana talked to Jim Nasium, the owner of Forever Fitness, about things he could do to attract more women, but he had little interest in making any changes. "I've got all the business I can handle," he told Briana. "Why should I spend a bunch of money to redecorate and add extra equipment? Besides, lots of the guys who work out here tell me they like the simple, no-frills atmosphere." Frustrated by Jim's indifference, Briana began looking into the possibility of starting a gym to appeal to young, well-educated women. After visiting gyms in other towns and talking to several friends to get ideas, she came up with a detailed plan for her gym. She then described her ideas to women in the community to see how much interest there was in this type of facility. The extremely positive response encouraged her to go ahead with her plans. It took a while, but she ultimately obtained the financial backing to go into business. Briana calls her new health club ShapeUP. It offers a spacious and attractive locker room, better cardio equipment, a child care area so young mothers can have someone watch their toddlers while they work out, and exercise classes designed to appeal to young women. When a woman joins her club, Briana schedules a free session with a personal trainer who works with the new member to design a personalized workout program. Briana tries hard to keep close to her customers by maintaining a social media presence, sending them a monthly e-mail newsletter, and routinely sending surveys asking what they like and don't like about ShapeUP. She wants to please her existing customers and keep them coming back. In fact, now that ShapeUP has a strong membership base, Briana believes it is more important to keep existing customers loyal than to attract new customers. In addition to the comments from her own customers, Briana also spends a lot of time tracking economic, social, and competitive trends in the fitness industry, trying to identify factors that can affect the marketing success of her club. She subscribes to several journals and magazines that cover trends and report on research findings related to the business. She has found that these publications provide her with an inexpensive source of useful information.
117.1) When Briana wants to obtain information to research changes in her market or determine what her customers are likely to want in the future, she relies on the articles and data available in trade journals, feedback from surveys, and personal interviews of her customers. Which statement about Briana's sources of information is most accurate?
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A) Briana is relying entirely on primary data for her research needs. B) Briana is relying entirely on secondary data for her research. C) The surveys and personal observations provide primary data, while the journals provide secondary data. D) The surveys and personal observations provide secondary data, while the journals provide primary data.
117.2) The fact that ShapeUP is designed to appeal to women of a certain age, education, and income level means that Briana is using A) demographic segmentation. B) psychographic segmentation. C) volume segmentation. D) geographic segmentation.
117.3) When Briana developed a detailed description of her ideas for a gym and asked for feedback from women about the proposal, she was engaging in A) test marketing. B) psychographic segmentation. C) concept testing. D) prototype analysis.
117.4)
Which statement about Briana's marketing approach is most accurate?
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A) Briana is basing her marketing approach on a variation of the mass marketing strategy. B) Briana's marketing strategy appears to be consistent with several key aspects of relationship marketing. C) Many recent studies suggest that Briana will be unable to earn a reasonable profit because she is serving too small a segment of the market rather than the entire market. D) Briana's marketing efforts put too much emphasis on retaining existing customers and not enough on obtaining new customers.
117.5) When Briana attempts to identify economic, social, and competitive factors that could affect her success in the fitness market, she is engaging in A) positioning analysis. B) concept testing. C) target marketing. D) environmental scanning.
118) Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have a value for customers, clients, partners, and society at large. ⊚ true ⊚ false
119) The activities of marketers depend on what needs to be done to satisfy consumer wants and needs, in other words, helping the buyer buy. ⊚ true ⊚ false
120)
In the evolution of marketing, the production era assumed an unlimited market.
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⊚ ⊚
true false
121) The four eras of the evolution of marketing are (1) production, (2) selling, (3) advertising, and (4) stakeholder relationships. ⊚ true ⊚ false
122)
The focus of the production era of marketing was on distribution and advertising. ⊚ true ⊚ false
123) The tremendous demand for consumer goods and services after World War II helped launch the production era of marketing. ⊚ true ⊚ false
124) Business in the production era consisted mostly of assembly-line operations such as automobile manufacturers. ⊚ true ⊚ false
125) During marketing’s selling era, businesses turned from an emphasis on production to an emphasis on selling. ⊚ true ⊚ false
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126) The marketing concept has three parts: (1) a consumer orientation, (2) a service orientation, and (3) an advertising orientation. ⊚ true ⊚ false
127) In the evolution of marketing, the marketing concept era emphasized selling and advertising in an effort to persuade consumers to buy existing products. ⊚ true ⊚ false
128) The marketing concept emphasizes that everyone from the president of the firm to the delivery people should be customer oriented. ⊚ true ⊚ false
129) The marketing concept was used heavily by business when it was first suggested in the 1950s. ⊚ true ⊚ false
130) Customer relationship management (CRM) is the process of learning as much as possible about customers and doing everything you can to satisfy them. ⊚ true ⊚ false
131) The idea behind customer relationship management is to enhance customer satisfaction and stimulate long-term customer loyalty. ⊚ true ⊚ false
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132)
The marketing concept focuses more on profit than on the customer. ⊚ true ⊚ false
133)
The primary focus of marketing today is on selling and advertising. ⊚ true ⊚ false
134) During the early 1900s, businesses emphasized as much as possible about their customers and doing everything to satisfy them. ⊚ true ⊚ false
135) era.
Outstanding service after the sale was a primary focus of businesses during the selling ⊚ ⊚
true false
136) After World War II, the tremendous demand for goods and services among returning veterans allowed businesses to sell whatever they produced without having to worry about what the competition was doing. ⊚ true ⊚ false
137) It is the focus of marketers today to simply persuade consumers to buy the goods and services those marketers have available to sell.
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true false
138) Social media is having a minimal effect on the emerging era of mobile/on-demand marketing. ⊚ true ⊚ false
139) According to the box “Sending the Very Best Online,” Hallmark is now shifting its focus away from paper greeting cards and toward products such as gifts and home decor. ⊚ true ⊚ false
140) The marketing team at Forward March Calendar Company emphasizes marketing the products that will earn the company a profit. This focus on profit orientation shows that this company has not yet adopted the marketing era concept that emphasizes a customer orientation rather than a profit orientation. ⊚ true ⊚ false
141) The sales team at Your House Appliances works hard to develop a close relationship with their customers and to provide satisfaction even after the sale. These efforts by the company’s sales employees are part of the marketing process. ⊚ true ⊚ false
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142) Shiff Auto Repair finds out what customers want and then determines how to best meet their needs. Based on feedback from customers, Shiff provides a written estimate before any work is done, offers a more comprehensive guarantee than competitors, and calls customers after completion to make sure they are satisfied. These efforts suggest Shiff Auto is applying the concepts of customer relationship management. ⊚ true ⊚ false
143) The MillHouse Food Pantry is a nonprofit organization that helps underprivileged families. As a nonprofit organization, it does not perform marketing functions, since these functions are designed to help organizations earn a profit. ⊚ true ⊚ false
144) The main concern of the marketing mix is to match production levels with warehousing space. ⊚ true ⊚ false
145)
Placing a product in a location where people will buy it is part of the marketing mix. ⊚ true ⊚ false
146)
Designing a want-satisfying product is part of the marketing mix. ⊚ true ⊚ false
147)
Setting a price for the product or service is one element of the marketing mix. ⊚ true ⊚ false
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148) The primary factors involved in the marketing mix are sometimes called the five intangibles of marketing. ⊚ true ⊚ false
149) The marketing manager's job is to design a program that effectively combines the ingredients of the marketing mix. ⊚ true ⊚ false
150)
The four elements of the marketing mix are product, production, price, and predictability. ⊚ true ⊚ false
151) Providing people with a description of a potential new good or service and asking if the idea appeals to them are key parts of the marketing process. ⊚ true ⊚ false
152)
Concept testing involves placing a product in a place where consumers will buy it. ⊚ true ⊚ false
153) A test market refers to the people in a market that will be least likely to use the product or service the marketer is offering. ⊚ true ⊚ false
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154)
A brand name helps differentiate one seller’s goods from the competitors. ⊚ true ⊚ false
155) Test marketing involves developing a final description of the product and asking people if the proposed product appeals to them. ⊚ true ⊚ false
156) The marketing process includes decisions about the best way to get the product to the consumer. ⊚ true ⊚ false
157) Intermediaries are firms in the middle of a series of organizations that distribute goods from producers to consumers. ⊚ true ⊚ false
158) Promotion includes personal selling, publicity, and word-of-mouth efforts to persuade people to buy a firm's goods or services. ⊚ true ⊚ false
159) Unlike advertising, which is part of the promotional component of the marketing mix, personal selling is considered to be part of the distribution function.
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true false
160) The last step in the marketing process often includes building a continuing relationship with customers. ⊚ true ⊚ false
161) Marketers are concerned with selling goods and services, and therefore are not involved in designing the products their firm will sell. ⊚ true ⊚ false
162) Marketing involves developing and promoting a firm's products and allowing the firm's purchasing department to make all distribution and transportation decisions. ⊚ true ⊚ false
163) The most important component of the marketing mix is the actual design and production of the product. ⊚ true ⊚ false
164) Getting the product from the producer to the consumer is a production-related process and not related to the marketing mix. ⊚ true ⊚ false
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165) Marketing focuses on the pricing and distribution of want-satisfying products, as well as determining the best way to promote the products to consumers. ⊚ true ⊚ false
166) Marketing is a limited activity, performed when a business is first established and when it introduces a new product to the market. Once a firm has fine-tuned its marketing activities, it can turn its attention elsewhere. ⊚ true ⊚ false
167) When determining the price for a product, marketers must consider the costs of producing, distributing, and promoting the product. ⊚ true ⊚ false
168) For safety's sake, Morrison Metals produces as many products as possible since it’s not a good idea to rely on customers to inform the organization what they want to buy. ⊚ true ⊚ false
169) The marketing mix provides marketers with a detailed market analysis to determine opportunities and challenges as well as information needed to make good decisions. ⊚ true ⊚ false
170) Marketing research helps determine what customers have purchased in the past, what situational changes have occurred to change consumer preferences, and what consumers are likely to want in the future.
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true false
171) Effective marketing research involves listening to customers, employees, shareholders, and other stakeholders. ⊚ true ⊚ false
172)
The first step in the marketing research process is to collect relevant data. ⊚ true ⊚ false
173) Secondary data should be gathered first because this type of information is less expensive to obtain. ⊚ true ⊚ false
174) Secondary data consists of information that has already been compiled by others and is published in journals and books or made available online. ⊚ true ⊚ false
175)
A phone or online survey is an example of primary data collection. ⊚ true ⊚ false
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176) A focus group consists of a small group of people who meet, under the direction of a discussion leader, to communicate their opinions about an organization, its products, or other issues. ⊚ true ⊚ false
177)
Marketers use very detailed surveys to gather secondary data. ⊚ true ⊚ false
178) The final step of the marketing research process involves selecting from several alternative strategies, and performing follow-up research to see if results were as expected. ⊚ true ⊚ false
179) Marketing research is a process that most firms complete once a year, in order to gather information for the firm's budgeting process. ⊚ true ⊚ false
180) In the marketing research process, marketers should examine alternative solutions before making a recommendation. ⊚ true ⊚ false
181) Marketing research needs to be an ongoing process at a firm since changes in the marketplace and among consumers is a continuous process. ⊚ true ⊚ false
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182) Government publications, such as the Statistical Abstract of the United States Survey of Current Business Census of Retail Trade, are sources of detailed primary data. ⊚ true ⊚ false
183) Companies that rely on secondary data are using the most expensive type of data available in the research process. ⊚ true ⊚ false
184) Because accurate and timely market information is vital to a firm's success, businesses should budget whatever it takes to get the best data available. ⊚ true ⊚ false
185) Marketing research usually begins with secondary data because it is more accurate and more relevant than primary data. ⊚ true ⊚ false
186) Whenever available, marketers should rely exclusively on primary data because it is much more accurate than secondary data. ⊚ true ⊚ false
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187) Jensen Communications just wrapped up an online survey of several of their current customers. In addition, they also plan to hold detailed personal interviews with about 15 additional customers. Both the online survey and the interviews are sources of primary data for Jensen Communications. ⊚ true ⊚ false
188) As a personal chef for a prominent family, Kim has been invited by a publisher to meet with nine other people to discuss a new concept for a health and wellness magazine. A member of the publisher's marketing staff will be at the meeting to guide the discussion and to record the participants' comments and suggestions. If Kim accepts the invitation, she will be participating in a focus group. ⊚ true ⊚ false
189) Environmental scanning is a green concept that involves the tracking of pollution generated by a firm and its impact on society. ⊚ true ⊚ false
190) The process of identifying the factors that can affect marketing success is called environmental scanning. ⊚ true ⊚ false
191) Population growth and current trends are two elements of a firm's sociocultural environment. ⊚ true ⊚ false
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192) Consumer databases, blogs, and social network sites are some of the technological factors that are used by marketers to develop goods and services. ⊚ true ⊚ false
193) Successful marketers adjust their product offerings as the level of economic activity changes. ⊚ true ⊚ false
194) The two major types of markets in business are the consumer market and the government market. ⊚ true ⊚ false
195) The business-to-business (B2B) market involves the marketing of goods and services to institutions that sell, rent, produce, or supply goods to others. ⊚ true ⊚ false
196) When classifying a product as a consumer product or a B2B product, the primary factor to consider is the financial status of the buyer. ⊚ true ⊚ false
197) Price is the determining factor as to whether a good is classified as a consumer product or a B2B product. ⊚ true ⊚ false
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198)
The purchase of a display case is likely a B2B product. ⊚ true ⊚ false
199) The consumer market consists of all the individuals or organizations that want goods and services in order to produce other goods and services to sell, rent, or supply to others. ⊚ true ⊚ false
200) A cup of yogurt is an example of a product that would always be classified as a consumer good. ⊚ true ⊚ false
201) Products such as computers, tablets, telecommunication equipment, smartphones, and other manufactured or mass-produced items are always classified as B2B products. ⊚ true ⊚ false
202) Rae, a manager for Office Wares Manufacturing, spends much of her time reviewing the global, technological, sociocultural, competitive, and economic factors that can influence the success of her company's marketing efforts. Rae’s efforts indicate that she is involved with environmental scanning. ⊚ true ⊚ false
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203) Market segmentation is the process of dividing a market into several groups whose members have dissimilar characteristics. ⊚ true ⊚ false
204)
Selecting which groups an organization can serve profitably is called target marketing. ⊚ true ⊚ false
205) With careful attention to controlling costs and quality, businesses can typically satisfy consumers with a standardized product for different markets. ⊚ true ⊚ false
206) Target marketing is a business strategy that focuses a firm's marketing efforts toward a potentially profitable segment of a larger market. ⊚ true ⊚ false
207) Because consumers differ in age, education, income, and tastes, companies will be more likely to succeed if they target a segment of a market and develop goods and services specially tailored to that group. ⊚ true ⊚ false
208) Market segmentation allows a company to group together consumers with similar characteristics. ⊚ true ⊚ false
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209) Demographic segmentation divides a market into segments based on the customer's location. ⊚ true ⊚ false
210) Psychographic segmentation involves dividing a market into segments based on lifestyle, values, attitudes, or interests. ⊚ true ⊚ false
211) Separating a market by the amount of the product consumed is known as volume segmentation. ⊚ true ⊚ false
212) The strategy of focusing on small but profitable market segments is called micro marketing. ⊚ true ⊚ false
213) One-to-one marketing refers to developing a unique mix of goods and services for each individual customer. ⊚ true ⊚ false
214) Travel agencies demonstrate a one-to-one marketing strategy when they develop unique vacation packages for individual customers.
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true false
215)
One-to-one marketing is never used in the consumer market. ⊚ true ⊚ false
216)
Mass marketing means developing products and promotions using little segmentation. ⊚ true ⊚ false
217) A basic principle of relationship marketing is that firms should concentrate on producing and promoting products that appeal to large groups of people. ⊚ true ⊚ false
218) Relationship marketing is commonly used by marketers promoting consumer goods that everyone uses, such as toothpaste and deodorant. ⊚ true ⊚ false
219) Relationship marketing moves away from mass production and toward custom-made goods and services. ⊚ true ⊚ false
220) Relationship marketing is rather easy to implement in the B2B market but almost impossible to use in the consumer market due to the sheer size of the consumer market.
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true false
221) Firms adopting a relationship marketing strategy often establish an online presence to communicate with customers. ⊚ true ⊚ false
222) Relationship marketing depends on understanding individual consumers and responding quickly to their wants and needs. ⊚ true ⊚ false
223) Consumer behavior is influenced by the attitudes, values, and ways of doing things that are passed from one generation to the next. ⊚ true ⊚ false
224) The set of values, attitudes, and ways of doing things that result from belonging to a certain ethnic, religious, or racial group is called that group's cognitive dissonance. ⊚ true ⊚ false
225) In consumer behavior, learning involves changes in an individual's behavior resulting from previous experiences and information. ⊚ true ⊚ false
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226) A reference group refers to society's accepted values, attitudes, and ways of doing things that consumers have to learn. ⊚ true ⊚ false
227) Cognitive dissonance refers to the comfort consumers feel in knowing they are choosing a product that other consumers have purchased and liked. ⊚ true ⊚ false
228) In order to be successful, marketers avoid small market segments in favor of larger targets. ⊚ true ⊚ false
229) The purpose of market segmentation is to identify the features of a product that will appeal to as many customers as possible. ⊚ true ⊚ false
230) Using advances in technology to maintain databases of customer information is more important for firms involved in mass marketing than it is for those firms using relationship marketing. ⊚ true ⊚ false
231)
In general, the broader the market a firm tries to serve, the better its chances of success. ⊚ true ⊚ false
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232) The general marketing approach used by clothing retailer Stitch Fix, as related in the box “Shuffling Your Style with Stitch Fix,” is an example of relationship marketing. ⊚ true ⊚ false
233) Evie is a sales representative for a textbook publisher. She spends a great deal of time visiting college professors who have already adopted one of her books for use in her classes. She makes sure they have all the supplements to the book they need and are informed about when new editions will be available. Evie’s emphasis on keeping her existing customers satisfied is consistent with the philosophy of relationship marketing. ⊚ true ⊚ false
234) The management at Peterson Interiors has replaced their outdated marketing approach with an approach that emphasizes relationship marketing. Under this new approach, Peterson’s salespeople will be expected to devote less time to current customers and a larger share of their time searching for new customers. ⊚ true ⊚ false
235) The company website for Quick Key Computers is a place for customers to get the latest information about new products, special offers, and technical support. The company has also added a chat function that allows customers to communicate with representatives immediately. Quick Key’s approach indicates that it is trying to utilize relationship marketing. ⊚ true ⊚ false
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236) Mattie bought an expensive sports car last week. Immediately after the purchase, she worried that she paid too much, and that a less expensive model with better gas mileage would have been a wiser choice. Marketers refer to the doubts Mattie is experiencing as selfactualization. ⊚ true ⊚ false
237) Kendra often changes her dress, speech, and mannerisms in response to the latest trends she sees on Instagram posts from her favorite celebrities. She even supports the same social causes her favorite stars support. Kendra’s behavior suggests that famous people are an important reference group for her. ⊚ true ⊚ false
238)
B2B marketers include manufacturers, retailers, hospitals, and the government. ⊚ true ⊚ false
239) The B2B market involves fewer trades and fewer dollars spent than the consumer market because there are so many more consumers than there are businesses. ⊚ true ⊚ false
240) Marketing strategies used effectively in the business-to-business markets are exactly the same as strategies used by marketers in consumer markets. ⊚ true ⊚ false
241) In B2B markets, sellers rely on wholesalers and retailers to efficiently distribute their products.
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⊚ ⊚
true false
242) Buyers in the B2B market tend to be less emotional about the purchase decision than buyers in the consumer market. ⊚ true ⊚ false
243) There is much more emphasis on personal selling in the consumer markets than in the B2B markets. ⊚ true ⊚ false
244)
B2B markets tend to be geographically concentrated. ⊚ true ⊚ false
245) Marketing goods and services to the B2B market relies more heavily on advertising than marketing efforts aimed toward the consumer market. ⊚ true ⊚ false
246) While most students find marketing an interesting and meaningful subject, one drawback of majoring in marketing is that it prepares students for only a narrow range of career options. ⊚ true ⊚ false
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247) Cedrick accepted a sales position at Zip Computers. Before joining Zip, Cedrick worked in the electronics department of a retail store and sold personal computers and tablets to consumers. In his new job, Cedrick will sell personal computers and tablets to businesses. Despite the fact that the products sold to these two customer groups are quite similar, Cedrick is likely to find that purchasing decisions by buyers in the two markets will be influenced by different factors. ⊚ true ⊚ false
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Answer Key Test name: chapter 13 7) C 8) A 9) A 10) B 11) B 12) C 13) D 14) C 15) B 16) C 17) A 18) D 19) A 20) D 21) D 22) D 23) B 24) C 25) A 26) C 27) D 28) B 29) A 30) C 31) A 32) B
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33) D 34) A 35) D 36) B 37) B 38) A 39) B 40) A 41) C 42) B 43) C 44) B 45) B 46) C 47) A 48) A 49) B 50) D 51) C 52) B 53) B 54) B 55) B 56) A 57) C 58) B 59) C 60) A 61) A 62) D
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63) A 64) C 65) D 66) B 67) A 68) A 69) C 70) B 71) D 72) B 73) A 74) C 75) C 76) A 77) B 78) D 79) D 80) B 81) C 82) B 83) D 84) A 85) C 86) B 87) A 88) B 89) D 90) B 91) A 92) A
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93) D 94) D 95) A 96) B 97) B 98) D 99) B 100) A 101) B 102) C 103) A 104) B 105) B 106) C 107) D 108) D 109) A 110) B 111) C 112) C 113) B 114) A 115) C 116) C 117) Section Break 117.1) C 117.2) A 117.3) C 117.4) B 117.5) D
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118) TRUE 119) TRUE 120) TRUE 121) FALSE 122) FALSE 123) FALSE 124) FALSE 125) TRUE 126) FALSE 127) FALSE 128) TRUE 129) FALSE 130) TRUE 131) TRUE 132) FALSE 133) FALSE 134) FALSE 135) FALSE 136) FALSE 137) FALSE 138) FALSE 139) TRUE 140) FALSE 141) TRUE 142) TRUE 143) FALSE 144) FALSE 145) TRUE 146) TRUE 147) TRUE
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148) FALSE 149) TRUE 150) FALSE 151) TRUE 152) FALSE 153) FALSE 154) TRUE 155) FALSE 156) TRUE 157) TRUE 158) TRUE 159) FALSE 160) TRUE 161) FALSE 162) FALSE 163) FALSE 164) FALSE 165) TRUE 166) FALSE 167) TRUE 168) FALSE 169) FALSE 170) TRUE 171) TRUE 172) FALSE 173) TRUE 174) TRUE 175) TRUE 176) TRUE 177) FALSE
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178) TRUE 179) FALSE 180) TRUE 181) TRUE 182) FALSE 183) FALSE 184) FALSE 185) FALSE 186) FALSE 187) TRUE 188) TRUE 189) FALSE 190) TRUE 191) TRUE 192) TRUE 193) TRUE 194) FALSE 195) TRUE 196) FALSE 197) FALSE 198) TRUE 199) FALSE 200) FALSE 201) FALSE 202) TRUE 203) FALSE 204) TRUE 205) FALSE 206) TRUE 207) TRUE
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208) TRUE 209) FALSE 210) TRUE 211) TRUE 212) FALSE 213) TRUE 214) TRUE 215) FALSE 216) TRUE 217) FALSE 218) FALSE 219) TRUE 220) FALSE 221) TRUE 222) TRUE 223) TRUE 224) FALSE 225) TRUE 226) FALSE 227) FALSE 228) FALSE 229) FALSE 230) FALSE 231) FALSE 232) TRUE 233) TRUE 234) FALSE 235) TRUE 236) FALSE 237) TRUE
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238) TRUE 239) FALSE 240) FALSE 241) FALSE 242) TRUE 243) FALSE 244) TRUE 245) FALSE 246) FALSE 247) TRUE Student name:__________ 1) From a marketing management perspective, what is the meaning of a total product offer? What are the important elements in the total product offer of your college or university?
2) Consumer goods and services are generally classified into four specific categories. What are the four categories, and how do they differ? Illustrate by giving examples of products that are often included in each category.
3)
Discuss the role of packaging in a firm's total product offer.
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4)
What is a brand? What is a brand name? What is meant by brand equity?
5)
When consumers calculate the value of a product, they A) subtract the cost of production from the market price. B) eliminate all nontangible elements that might affect their perception of the product. C) look at the benefits the product provides then subtract the cost. D) identify the variable and the fixed components of the product's benefits.
6)
The best way for a firm to compete in the marketplace is to A) introduce products at a low price and raise prices once established. B) promote products that have the best value. C) make products that are identical to the competition. D) keep inventory levels low.
7) to
Restaurants, like other businesses, often find that the best way to succeed in the market is
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A) listen to customers and adapt products to their needs. B) create a product for which they could charge an exceptionally high price. C) create a winning combination of advertising and personal selling for all of the stores in the chain. D) open more stores in a single year than other food-service operators.
8) The combination of all the factors that consumers evaluate when deciding whether or not to buy a good or service is called a A) total product offer. B) product mix. C) product differentiation. D) marketing product package.
9)
When people consider purchasing a good, they A) are responding to the market forces of supply and demand. B) are most influenced by the price of the product or service. C) will not consider goods that require them to make a special effort to purchase. D) may evaluate and compare a variety of factors.
10) What term refers to a group of products offered by a firm that are physically similar or are intended for a similar market? A) product matrix B) product line C) product mix D) total product offer
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11)
The combination of product lines offered by a manufacturer is called the firm's A) product matrix. B) product mix. C) total product offer. D) product portfolio.
12)
The best product development strategy for most firms is to
A) develop a small number of products that achieve market success and stick with them, because constantly changing old products (or introducing new ones) can confuse and frustrate customers. B) maintain one product line while adding regularly to that product line over time to sustain customer interest. C) constantly monitor consumer wants and needs and be willing to develop new products and adapt policies and services as those consumer needs begin to change. D) focus on the actual product or service and don't worry too much about factors such as image, price, and service.
13)
When consumers decide to purchase a particular product, they A) will search for the retailer that offers the lowest price. B) consider the total collection of benefits that the product offers. C) base their decision on a brand name nearly all of the time. D) initially evaluate the product's package.
14)
In evaluating colleges, students and parents are likely to judge a school A) strictly on the basis of major curriculums offered. B) based on the tuition. C) by the collection of benefits offered by the school. D) on the anticipated rate of return on their tuition investment.
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15) The Coca-Cola Company produces Diet Coke, Diet Coke with fruit flavors, and Coke Zero along with a number of other flavors. These products are part of Coca-Cola's A) product line. B) product mix. C) product position. D) product collection.
16) According to the box “Connecting Through Social Media,” Birdy Grey has used social media to A) address environmental concerns in Congress. B) attack their competition for copying their product line. C) partner with other companies with a large social following to co-market. D) learn what their customers want.
17) Morrison Mountain Bikes sells high-quality bicycles and accessories. The store is known for a pleasant environment, friendly salespeople, and an excellent service department. All of these elements are part of the __________ offered by Morrison. A) total product offer B) product line C) competitive environment D) marginal utility package
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18) Glazed Pecan Candy Company may use the same ingredients as most other producers of pecan candies and may not even be much better than other well-known brands of the candy. However, the company wraps its glazed pecans in expensive-looking foil and places them in very attractive boxes. It promotes its products in advertisements as "the ultimate indulgent experience." The Glazed Pecan Candy Company charges a much higher price than most competitors, but sales continue to grow. This success indicates that A) consumers always behave in an irrational manner. B) there is more to the total product offer than the physical product. C) consumers seldom consider price when making a buying decision for goods such as candy. D) candy is best classified as a convenience good.
19) Having just graduated college and about to start a new marketing job, Jason needed reasonably priced transportation. He listed the kinds of things he wanted in a car: a large trunk; a comfortable back seat for his two dogs; 4-wheel drive for snow and ice; and economical on gas. Marketers know that today's consumers A) are educated and are looking for features and not benefits. B) are willing to pay just about any price if they find the features they want. C) look for the best value (benefits outweigh the cost). D) are always economically sensitive, first.
20) Dawson Inc. makes pasta, paper goods, and adhesives. These different types of products are referred to as Dawson’s A) product line. B) product mix. C) product differentiation. D) product life cycle.
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21) The Procter & Gamble Company is a major producer of laundry detergents. In fact, Procter & Gamble produces Bold, Cheer, Dreft, Era, Gain, Ola, PMC, Tide and other detergents that all claim a variety of benefits. These products are part of Procter & Gamble's __________ in laundry detergents. A) product mix B) product concentration C) product store D) product line
22) Fran spent the day talking with a packaging company in South America, a lighting specialist in Italy, a touchpad expert in the United States, a prototype design firm in Malaysia, as well as a shipping firm in Mexico. Each of these firms provided expertise in the development of her company's latest product, a foldable eReader. The strategy that Fran’s firm used to develop its latest product is A) singular source product development. B) distributed product development. C) multiple source product development. D) multitasking product development.
23)
The purpose of __________ is to create real or perceived product differences. A) niche marketing B) product differentiation C) product mixing D) target marketing
24)
For small businesses, product differentiation
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A) is more difficult than it is for larger firms because of the high cost of product research and development. B) usually concentrates on the pricing component of the total product offer. C) can be an important strategy to gain market share. D) is less important than it is for big firms with multiple product lines.
25) Location is very important in the marketing of __________ because consumers desire to purchase these goods with a minimum of shopping effort. A) unsought goods B) shopping goods C) specialty goods D) convenience goods
26) Which products do consumers buy after comparing quality, price, and style from a variety of sellers? A) shopping goods B) specialty goods C) convenience goods D) unsought goods
27) __________ goods appeal to consumers who are willing to make an extra shopping effort to acquire them. A) Specialty B) Shopping C) Convenience D) Packaged
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28) __________ goods and services represent those products that consumers are unaware of or haven't thought of buying. A) Inferior B) Convenience C) Shopping D) Unsought
29) Products that are used in the production of other goods and services are called __________ goods. A) specialty B) shopping C) industrial D) sponsored
30) __________ consist of major capital equipment such as new factories and heavy machinery. A) Accessory goods B) Specialty goods C) Installations D) Shopping goods
31)
Computers, copiers, and printers used by businesses would be classified as A) installations. B) shopping goods. C) specialty goods. D) accessory equipment.
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32)
One characteristic of product differentiation is A) it is determined exclusively by price. B) it can be based on either real or perceived differences in products. C) it restricts price competition and market access. D) it is strictly a function of packaging.
33)
What would a firm most likely use to differentiate its product to the consumer? A) financial differences B) increased production C) elaborate packaging D) manual warehousing
34)
Which product would normally be classified as a shopping good or service? A) a laptop computer B) magazines C) designer watch D) candy bar
35)
Which statement regarding convenience goods and services is accurate? A) Shoppers will exert lots of effort to obtain the product. B) Consumers purchase the product on an infrequent basis. C) Consumers buy only after carefully comparing quality and value. D) Brand awareness and image are important in marketing these products.
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36) Which product would be considered an unsought good or service by a typical college student? A) college textbook B) pizza C) car towing D) cable television
37)
Which product would most likely be classified as a specialty good or service? A) a refrigerator B) a first edition copy of Moby Dick C) running shoes D) a car insurance policy
38) "It’s as sweet as chocolate!" is an advertising slogan for a new chewable vitamin. The manufacturer claims that their vitamin is of a higher quality and tastes better than any competing brand. These claims are part of the firm's strategy to achieve A) a specialty good. B) knockoff products. C) new-product development. D) product differentiation.
39) Giuseppe’s and Maria’s are Italian restaurant chains. Each restaurant offers similar items on their menus. However, Giuseppe’s restaurants are positioned in the market as elegant establishments with high prices. Maria’s, on the other hand, are located in middle-class neighborhoods, with a casual atmosphere that welcomes families with young children. The prices at Maria’s are in the moderate range. When evaluating the marketing strategies used by these restaurants, we can conclude that
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A) both practice product mix effectiveness. B) they utilize product differentiation. C) Giuseppe’s has chosen a shopping good strategy. D) their target markets differ, with one intended to appeal to the industrial market, and the other designed to attract the consumer market.
40) Snappy Fun is a new brand of chewing gum. The company knows product location is very important since consumers want to buy this type of product with a minimum of effort. Snappy Fun represents a(n) A) shopping good. B) specialty good. C) convenience good. D) industrial good.
41) Bethany Bridal is a wedding wear clothing store in a large suburban shopping mall. The managers of the store know that their customers usually comparison shop, looking carefully at quality and price before deciding to buy. With this information, Bethany Bridal carries quality clothing, offers competitive pricing, and friendly, helpful service. The target customers apparently view wedding attire as a(n) A) specialty good. B) convenience good. C) shopping good. D) unsought good.
42) Mavis, a collector of fine art, particularly loves paintings. She has been looking for an original Frida Kahlo painting for months and has said that she is willing to go to extraordinary efforts to acquire this painting for her collection. Clearly this painting represents a(n) __________ good for Mavis.
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A) shopping B) specialty C) unsought D) luxury
43) A self-portrait of a celebrated photographer sold at a Christie's auction for about 4 million dollars. According to Christie's, this was the highest price ever received for a photograph in the history of the auction business. As a student of marketing, you would classify this photo and other rare items sold through Christie's as A) unsought for goods. B) specialty goods. C) intangible goods. D) shopping goods.
44) Kim lives in Dallas where winters are normally fairly mild. Last January, during an unusually cold spell, the water pipes in her house froze and burst. She looked online to find a plumber who was able to come out and repair the pipes the same day. Prior to the frozen pipes, the plumber's services represented a(n) A) unsought service. B) industrial service. C) specialty service. D) convenience service.
45) Bridgeport Manufacturing acquired several pieces of expensive heavy machinery it intends to use in its operations. As an industrial good, this heavy machinery represents
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A) an installation. B) accessory equipment. C) an intermediate good. D) a shopping good.
46)
__________ is used to attract the attention of the buyer. A) Logistics B) Inventory C) Budgeting D) Packaging
47)
Today, packaging is A) the least important component of the marketing mix. B) assuming an increasingly important role in the promotion of products. C) exclusively intended to protect the product from damage. D) the most expensive component of the production process.
48)
In marketing today, packaging carries the added responsibility of A) promotion and sales. B) minimizing product liability. C) gaining access to international markets. D) keeping product costs down.
49)
The __________ on packages were intended to improve inventory control for businesses.
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A) images B) UPCs C) nutrition details D) units of measurement
50) The trend away from personal salespeople to self-service in many retail outlets has caused firms to A) reduce their advertising promotional budgets. B) rely more on personal sales efforts. C) place a greater promotional importance on packaging. D) decrease expenditures on social media and websites.
51)
The evaluation of packaging as a marketing function indicates that
A) the package is less important as the Internet provides consumers with easily obtained information. B) packaging carries more of the promotional burden of the product. C) consumers are influenced less by packaging. D) the primary purpose of packaging is to limit the product liability of businesses.
52)
Which statement about packaging is the most accurate? A) Changes in packaging can improve the product itself and open up large new markets. B) Packaging is the least critical element of a firm's promotional strategy. C) Technology has had a very limited role in improving packaging. D) Packaging is not affected by federal regulations.
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53) Which statement is the most accurate assessment of the role packaging plays in product offerings? A) The importance of packaging has diminished as online retailing has grown. B) While packaging plays an important role in marketing goods, it is not relevant to the marketing of services. C) Effective packaging eliminates the potential of product liability suits. D) The importance of packaging is greater now than ever.
54) Attracting attention, describing contents, explaining benefits, and identifying the uses of a product are all functions of A) target marketing. B) UPCs. C) packaging. D) market segmentation.
55) According to the box “Making Ethical Decisions,” there is more and more confusion growing around what makes a product "natural." What is the Food and Drug Administration (FDA) considering doing to alleviate the confusion? A) banning companies from using "natural" B) allowing all companies to claim products are "natural" C) creating a definition for "natural" D) limiting the use of "natural" to only cleaning products
56) Next Up Computer Company thinks it will make a splash with cartoon-themed laptop cover designs scheduled for release next year. The computers do not have any other feature differences from what Next Up currently offers. This effort is an example of using __________ to differentiate a product as new.
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A) packaging B) brand awareness C) logistics D) brand extension
57) Textbook publishers use a packaging strategy known as __________. Often the publisher will combine complementary products for a single price such as a new textbook and an access code for online software that students can use to test themselves on new concepts and principles. A) warranting B) bartering C) bundling D) trademarking
58) A __________ is a name, symbol, or design (or combination of these) that identifies the goods or services of one seller or group of sellers and distinguishes them from those of competitors. A) trademark B) brand C) logo D) copyright
59) A brand that has been given exclusive legal protection, such as the McDonald's golden arches, is a A) private brand. B) warranty. C) dealer brand. D) trademark.
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60) From the buyer's perspective, what is a benefit of a product with a well-known brand name? A) quality assurance B) helps in promotional efforts C) adds to repeat purchases D) differentiates products so that prices can be set higher
61)
What is a benefit of a brand name for a seller? A) quality assurance B) reduction in search time C) increased repeat purchases D) additional prestige
62) When a brand becomes commonplace and identified with a category of goods rather than the unique product of a specific manufacturer, the brand may become a A) generic name. B) trademark. C) universal product code. D) product liability issue.
63) Nonbranded products that sell below the price of national brands, have very basic packaging, and are backed with little or no advertising are called A) universal goods. B) distributor brands. C) house brands. D) generic goods.
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64)
Knockoff brands are __________ copies of national brand-name goods. A) small-run B) online C) illegal D) licensed
65)
Brand __________ refers to the value of a brand name and associated symbols. A) equity B) identification C) positioning D) ownership
66) The degree to which customers are satisfied and are committed to future purchases of a desired brand is called A) brand awareness. B) brand relations. C) brand loyalty. D) brand intensity.
67)
The swoosh is Nike’s A) generic name. B) label. C) trademark. D) brand.
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68)
The brand names that are used by producers that distribute products nationally are called A) manufacturers' brands. B) product category brands. C) generic brand names. D) universal brand names.
69) What refers to how quickly or easily a given brand name comes to mind when a product category is mentioned? A) brand equity B) brand loyalty C) brand awareness D) brand insistence
70) When consumers reach the point of brand __________, the product becomes a specialty good. A) association B) desire C) awareness D) insistence
71) Products that carry the name of a distributor or a retailer instead of the manufacturer's name are called A) dealer (private) brands. B) knockoff brands. C) generic brands. D) equity brands.
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72) Brand __________ refers to the linking of a brand to other favorable images, such as a celebrity. A) association B) loyalty C) awareness D) preference
73) A __________ has direct responsibility for all the elements of the marketing mix for one brand or product line. A) channel specialist B) brand manager C) product engineer D) brand specialist
74) One reason many large consumer-product companies make use of __________ is to have greater control over new-product development and product promotion. A) brand equity teams B) equity specialists C) product consultants D) brand management teams
75) Many supermarkets carry plain packages that only identify the name of the product that is inside. For example, a label may read simply "green peas" or "frozen strawberries." These goods represent
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A) private labels. B) manufacturers' brands. C) generic goods. D) universal code branding.
76) Certain brand names, such as Jacuzzi and Crock-Pot, fear they could become __________, because they are so commonly identified with a specific product category that consumers use these names to refer to any product in that category regardless of the manufacturer. A) family brands B) generic names C) universal products D) knockoff names
77) Some businesses use nostalgic ads to rekindle the memories and emotions of consumers to an earlier time and place. This technique of linking a brand name to a pleasant memory or favorable image is the goal of brand A) association. B) loyalty. C) insistence. D) preference.
78)
One of the reasons why companies create the position of brand manager is to A) have greater control over new-product development and promotion. B) cut expenses associated with the marketing of products. C) limit the amount of market research expenses products require. D) identify and prosecute firms that violate trademark protection.
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79)
Which description pertains to the job performed by brand managers? A) It is mainly concerned with the promotion of the entire product mix of their firm. B) It involves broad responsibilities for the marketing of a specific brand or product
line. C) It is likely to become less important in firms that utilize the Internet. D) It focuses more on the pricing and promotion of established goods than on the development of new products.
80)
The box “What’s in a Name” explains
A) the importance of reality TV, and the various TV programs that have become international phenomena. B) the procedure a business goes through to register its domain name. C) how the positive appeal of a name can go a long way. D) the legal issues associated with using knock-off names.
81) Designers readily understand the power of __________. Shortly after former first lady Michelle Obama was seen in a short-sleeve dress by a famous American designer, the designer shared this image on social media and sales of the dress skyrocketed. A) brand equity B) brand association C) brand awareness D) marketing parity
82) Whenever one of the Kardashian sisters is seen on Instagram, Facebook, or another social media site wearing a new lip gloss or talking about a facial moisturizer, their fans flock to stores to buy the products. This is an example of
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A) brand equity. B) viral marketing. C) brand association. D) marketing parity.
83) Folgers's and Seattle’s Best are __________ that allow customers to easily distinguish these products from other coffee products. A) patents B) trade symbols C) brand names D) dealer brands
84)
The Pillsbury Doughboy is an example of a A) patent. B) trademark. C) private brand. D) generic label.
85) Malcolm is approached by a street vendor selling Rolex watches at ridiculously low prices. Malcolm, however, noticed the sign near the watches that said “Rowlex watches for sale” and was suspicious that the watches were illegal __________ brands. A) knockoff B) private C) generic D) manufacturers’
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86) Sears sells batteries under its own Diehard brand name even though another company actually produces these batteries. This is an example of a A) knockoff brand. B) generic brand. C) dealer (private) brand. D) brand association.
87) Anheuser-Busch/InBev Company Inc. has been given the exclusive right to the name Budweiser and is legally protected from others using this name by the __________ they hold. A) licensing agreement B) brand name C) copyright D) trademark
88) Green Giant Green Beans, Chevrolet Corvette, Coca-Cola, Dole Pineapple, and Peter Pan Peanut Butter are all examples of A) private brands. B) wholesaler brands. C) manufacturers' brands. D) registered generic brands.
89) Tri-State Grocery operates a large chain of stores across three midwestern states. While Tri-State doesn't actually produce any breakfast cereal, it markets a line of cereal under its own brand name that was produced by another company. These cereals represent a A) manufacturers' brand. B) generic brand. C) knockoff brand. D) dealer (private) brand.
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90) An advertisement for the Xerox Corporation encourages customers to say, "Copy it" rather than "Xerox it." This indicates that Xerox is fearful that its brand name might become a(n) A) equity name. B) generic name. C) private brand. D) public domain good.
91) Millie, a marketing manager at Morning Time Tea, is responsible for marketing the company's products and is involved in major decisions concerning the development of new products that will be included in this product line. Millie serves as a A) brand manager. B) market mix specialist. C) target market manager. D) product line specialist.
92) As a manager at Yummy Melts, Martin is responsible for the firm's Just Right brand of ice cream. He recently approved a proposal to test market new ice cream flavors. He is also considering the possibility of lowering the price of the ice cream and initiating a new advertising campaign. Martin serves as a A) product development manager. B) target market manager. C) brand manager. D) commercialization manager.
93)
A leading cause of new-product failure is
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A) insufficient competition. B) product promises that are not delivered. C) the automation of the product development process. D) excessive product differentiation.
94)
What is a stage of the new-product development process? A) automation B) media screening C) commercialization D) selective perception
95) __________ presents an idea for a new product to potential customers to test their reactions. A) Idea generation B) Concept testing C) Benchmarking D) Prototype development
96) __________ is the stage of new-product development that involves promoting a product to distributors and developing advertising and sales campaigns in order to generate and maintain consumer interest. A) Commercialization B) Brand identification C) Product differentiation D) Merchandising
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97)
The greatest source of ideas for new industrial products is generated from A) consumer suggestions. B) competitor activity. C) employee ideas. D) research and development.
98)
Product screening is designed to A) shorten the product life cycle. B) reduce the number of new-product ideas being worked on at any one time. C) reduce the time involved in new-product development. D) move production to low-wage countries.
99)
What is a relevant criterion for the product screening process? A) employee involvement B) production capacity of competitors C) profit potential D) the stage of the product life cycle
100) The No-Salt Pretzel Company just completed the first stages of product development of its new low-calorie pretzel bites and immediately took the product directly to consumers. Marketers partnered with a large theme park in Orlando, FL, to perform __________. The NoSalt company’s marketing department wanted to know if consumers found this product to be a satisfying snack for all ages. Subsequently, they also wanted to determine what customers would be willing to pay for the pretzel bites. A) commercialization B) concept testing C) prototyping D) product screening
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101) Brianna works as a manager at Carson Manufacturing. The innovative staff at the company is regularly encouraged to suggest ideas for new products. Since Brianna works in product screening, it is her job to A) give the final approval for the commercialization of new products. B) reduce the number of new products being worked on at any one time. C) market test the product ideas that originate with the staff. D) develop the concept testing to establish the personnel required for each new project.
102) The __________ is a theoretical model that describes the sales and profit performance of a product class over time. A) product life cycle B) marketing template C) market stages model D) consumer decision-making process
103)
The product life cycle consists of __________ stages. A) three B) four C) five D) six
104)
The stages of the product life cycle are
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A) production, inventory, exchange, usage, and disposal. B) conception, testing, production, commercialization, and obsolescence. C) introduction, growth, maturity, and decline. D) opportunity recognition, concept testing, production, market acceptance, brand insistence, and obsolescence.
105) The four-stage theoretical model that describes the evolution of a product from birth to its demise is referred to as the A) growth-share matrix. B) developmental life span analysis. C) product life cycle. D) product market progression index.
106) According to the product life cycle model, sales are expected to peak in the __________ stage. A) introduction B) maturity C) growth D) commercialization
107)
According to the product life cycle model, profits tend to A) remain relatively constant until the decline stage, when they begin to drop. B) reach a peak near the end of the maturity stage. C) rise rapidly during the market preference stage. D) peak before sales reach their highest level.
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108)
The product life cycle model helps marketers realize that A) consumers are always ready to try a new product if it is priced correctly. B) different stages in the life cycle call for different marketing strategies. C) sales and profit levels can be forecasted accurately. D) careful product screening will increase profits over the life of a product.
109)
What is a stage in the product life cycle? A) commercialization B) decline C) peak D) acceptance
110) As a product progresses through each stage of the product life cycle, successful marketers recognize that each stage requires A) a different marketing strategy. B) a consistent application of fundamental marketing practices. C) an increase in the amount spent on advertising. D) more emphasis on personal selling.
111)
When reviewing the product life cycle model, it is important to remember that
A) although all products go through each stage of the life cycle, the time frame can vary considerably from one product to another. B) it is a theoretical model that may not be followed by all products. C) the maturity stage accounts for the fastest growth in sales. D) companies earn their largest profits in the introduction stage.
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112)
Once a good or service nears the end of its product life cycle, the firm recognizes that A) it is impossible to revert to an earlier stage of the model. B) it can return to an earlier stage through creative marketing. C) it will enjoy relatively high profits. D) marketing dollars spent now will provide little benefit.
113) Which stage of the product life cycle encompasses rapidly rising sales, very high profit levels, and a growing number of competitors? A) growth B) maturity C) saturation D) decline
114)
Which development is expected during the maturity stage of a product life cycle? A) a rapid increase in profits B) a rapid increase in the number of competitors C) peak sales D) reduced emphasis on promoting the product's brand name
115)
Which development is consistent with the introduction stage of the product life cycle? A) decreasing sales volume B) large number of competitors C) low profit levels or a potential loss D) minimum use of advertising
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116) During the __________ stage of the product life cycle, sales reach a peak, profits are declining, and the number of competitors starts to decrease. A) growth B) maturity C) saturation D) decline
117)
Which factor is consistent with the growth stage of the product life cycle? A) a peak in the sales curve B) high profit levels C) a stable number of competitors D) declining profits
118)
What is a characteristic of the decline stage of the product life cycle? A) falling sales B) price reductions C) many new firms entering the market D) increasing profits
119) Department store owner Dillon Foley decided to make a gutsy move with his high-end Panama Shore stores. Rather than focus on the upscale, luxury market that the store attracted earlier in the decade, he focused on bringing in clothing with more mass appeal. The stores succeeded in turning around downward trending sales. In conjunction with your understanding of the product life cycle, which statement summarizes the marketing strategy?
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A) Panama Shore recognized that it was not competing well with its traditional higher income market. It decided to change its product offering and price to appeal to a broader market and increase sales and profits. B) Panama Shore stores recognized several markets that it could reach with its upscale clothing lines. C) Panama Shore positioned itself against, rather than with, the competition. It decided to adhere to its price leadership position. D) Panama Shore knew that in order to re-invent itself, it was going to have to practice the same marketing strategy followed by Walmart and other discount stores. It would make all marketing decisions based on cost. The price on an item need only exceed what it cost to make and ship it. Falling prices became the norm.
120) Currently, which product would most likely be considered in the growth stage of the product life cycle? A) DVD players B) Welch's grape jelly C) VR games D) Camel cigarettes
121) Sales levels of Up-Top Climbing Gear are rising rapidly, profits are very high, and a growing number of competitors are taking aim at Up-Top’s market lead. Based on this information, Up-Top Climbing Gear is in which stage of the product life cycle? A) introduction B) growth C) maturity D) decline
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122) Sure-Start Battery’s promotional efforts are intended to increase the public's awareness of its new product's benefits and uses. This effort is consistent with the __________ stage of the product life cycle model. A) introduction B) growth C) maturity D) decline
123)
One popular pricing objective is to A) increase sales. B) increase brand awareness. C) fix prices among competitors. D) achieve less market share.
124)
For professional marketers, pricing is A) one of the four Ps of the marketing mix. B) considered to be a part of promotion. C) normally a government-regulated variable. D) totally based on the cost of products.
125) Producers often use __________ as a primary basis for setting prices on the goods and services they offer the public. A) tariffs B) costs C) market share D) quotas
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126) __________ involves designing a product so that it satisfies customers and meets the profit margins desired by the firm. A) Price discrimination B) Price leadership C) Target costing D) Cost-based pricing
127) A competition-based pricing strategy called __________ involves one or more dominant firms establishing the pricing practices that all competitors in an industry follow. A) skimming B) penetration C) target costing D) price leadership
128) __________ is the process used to determine the profitability of a product at various levels of sales. A) Cost-based pricing B) Break-even analysis C) Demand-based pricing D) Competition-based pricing
129) Costs incurred regardless of the number of units of a product that are produced or sold are called
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A) mixed costs. B) controllable costs. C) fixed costs. D) variable costs.
130)
__________ costs are those costs that change as the level of production changes. A) Fixed B) Mixed C) Variable D) Set
131) The number of units of a product that must be sold for total revenue to equal total costs is called the A) equilibrium volume. B) balanced quantity. C) contribution margin. D) break-even point.
132)
What occurs at the break-even point? A) profits are maximized B) variable costs are equal to total fixed costs C) target profit is achieved D) total revenue is equal to total cost
133) What is a pricing strategy that establishes a low price in hopes of attracting a great number of customers and discouraging competitors?
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A) penetration strategy B) odd-even pricing strategy C) skimming strategy D) price lining strategy
134) __________ uses price points that help create the impression that the product is less expensive than it is. A) High-low pricing B) Everyday low pricing (EDLP) C) Bundling D) Psychological pricing
135)
A skimming pricing strategy is used to
A) allow low-income households the ability to purchase a particular good or service. B) drive competitors out of business in order to achieve a monopoly position in the market. C) create a "common man" image to reach a larger market. D) establish a high price in order to earn the highest possible profit while there is little competition.
136)
The __________ strategy maintains low prices and typically does not have special sales. A) everyday low pricing (EDLP) B) cost-based C) target-based D) skimming
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137) Department stores often use __________ pricing in which they have regular prices that are relatively high, but offer special sales where prices are set lower than competitors. A) penetration B) bundling C) strategic D) high-low
138) Charging high prices for a new product to earn large profits during a time when there is little competition represents a __________ strategy. A) penetration B) bundling C) skimming D) cost-based
139) A competition-based pricing strategy in which all the competitors in an industry follow the pricing practices of one or more dominant firms is known as A) market fixing. B) price penetration. C) price leadership. D) primary pricing.
140)
Which strategy establishes a price based on the actions of rival firms? A) competition-based pricing B) cost-based pricing C) demand collection system D) bundling
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141) The strategy of charging prices based on consumer demand rather than cost or a predetermined profit margin represents A) competition-based pricing. B) cost-based pricing. C) target orientation. D) demand-oriented pricing.
142) Firms utilize __________ when they attempt to add value to their product by offering service after the sale, product demonstrations, or interactive customer websites. A) nonprice competition B) relationship branding C) niche marketing D) break-even segmentation
143)
One way a small firm can succeed against larger competitors is to A) determine their break-even point price. B) add value to their product offering. C) eliminate the fringe benefits offered to frequent customers. D) use break-even segmentation.
144) One of the reasons marketers emphasize nonprice differences in their competitive strategies is because A) consumers aren't concerned about prices. B) these methods have no impact on the cost of production. C) nonprice differences are tax deductible. D) relatively similar products can be enhanced.
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145)
As firms develop their marketing mix, it is important to remember that
A) prices must be linked directly to the cost of production. B) instincts and past history are the best guides in determining price. C) regardless of the strategy used, prices ultimately reflect the forces of supply and demand. D) firms are often restricted in creating pricing strategies by relevant government rules and guidelines.
146) The cost of raw materials used to produce a good or service represent the firm's __________ costs. A) fixed B) variable C) mixed D) set
147) The strategy of first determining what the market is willing to pay, then subtracting a desired profit margin to determine a desired cost of production, is called A) cost-based pricing. B) target costing. C) penetration pricing. D) skimming pricing.
148)
The formula for break-even analysis includes which component?
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A) depreciation B) forecasted sales C) production runs D) variable cost per unit of output
149)
The rent a firm pays each month for office space is an example of a(n) A) fixed cost. B) variable cost. C) mixed cost. D) uncontrollable cost.
150)
What is a potential problem with a high-low pricing strategy? A) It confuses and frustrates customers. B) It places too much emphasis on nonprice competition. C) It teaches customers to wait for sales, and therefore reduces profits. D) It is difficult to implement.
151) Shopping online allows customers to compare prices of many goods and services. This technology will likely A) cause businesses to increase their focus on nonprice aspects of their promotional message. B) bring about more emphasis on demand-oriented pricing. C) diminish in importance as quickly as other fads. D) focus government attention on the collusive pricing practices of firms in specific industries.
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152) Many products are promoted by emphasizing their key benefits, rather than setting the price lower than that of competitive goods. This emphasis on the product's benefits illustrates a(n) __________ strategy. A) penetration B) nonprice competition C) industry leader D) bundled package
153)
Which statement about nonprice competition is most accurate?
A) While still important, nonprice competition is becoming less critical as a result of the Internet. B) Marketers often rely on nonprice differences in their competitive strategy to enhance a relatively homogeneous product. C) Nonprice competition is much more important to large firms than it is to small firms. D) Firms have found that nonprice competition plays a secondary role that supplements the more important competition based on price.
154) Crossroad Transport is the one of the largest trucking companies in the Midwest. When the firm raised its prices by 11 percent, all of its competitors soon announced they too were raising their prices by 11 percent. It appears this industry is influenced by a __________ strategy. A) price skimming B) price leadership C) market pricing D) price discrimination
155) Shane Medical Stores will advertise a price of an over-the-counter drug at or below their cost. The intended goal of this loss leader strategy is to
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A) achieve a target profit. B) reduce the break-even quantity. C) build traffic and increase the customer base. D) create an upscale image.
156) Nathan asks you to calculate the break-even point for his firm. You respond that you will need more information, which includes A) the values for all assets and liabilities. B) total fixed costs, selling price per unit, and variable costs per unit. C) forecasted sales volume, operating expenses, and asset values. D) sales revenue and total liabilities.
157) Stewart Electronics is considering a strategy to charge a very high introductory price for their 4D home video theater. After identifying that their rival firms did not carry this new product, they chose this pricing strategy to achieve maximum profits. Stewart Electronics has chosen a __________ strategy. A) high-low pricing B) penetration C) bundling D) skimming
158) Ink-Full Writing Utensils utilizes a strategy of low-priced pens and markers to attract customers and discourage competition. This represents a __________ strategy. A) high-low B) bundling C) skimming D) penetration
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159) Renata’s company is bidding on the construction of a new lion display at a zoo. When putting together her bid, Renata began by determining what the zoo would be willing to pay for the structure, and then subtracting a reasonable profit for the company. The result would be the cost of production. For example: If price to zoo = $8 million, and company profit margin = $3 million, the cost to produce cannot exceed $5 million. [$8 million− $3 million = $5 million.] The demand-based pricing strategy in this example is called A) target costing. B) penetration pricing. C) cost-based pricing. D) volume pricing.
160) Leo noticed that the vending machine chip bag size had changed. Upon further investigation, he saw that each bag contained 2 ounces less than the previous chip bags. But the price remained the same! The pricing objective of the snack company is to A) increase profits by reducing the amount provided in each bag. B) build traffic at the vending machines by changing the size of the bag. C) undercut the competition by changing the size of the bag. D) increase market share by reducing the amount provided in each bag.
161)
What does a break-even point of 100 units mean to a firm?
A) The firm must sell 100 units to maximize its profits. B) Fixed costs plus variable costs equals 100 units. C) By producing 100 units, the firm can ensure that variable costs completely cancel its fixed costs. D) If the firm sells 100 units, its total revenues will equal its total costs.
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162) Roger entered into a contract with the federal government to design a computer simulation model for training national guard units. The contract calls for the final price to be set at a fixed percentage profit over and above the cost of production. This seems to represent a A) cost-based pricing strategy. B) supply and demand formula. C) demand-based pricing strategy. D) price leadership pricing strategy.
163) Kristie is considering adding a rack of greeting cards to her product offerings at The Avenue Bookstore. Her fixed costs associated with adding the greeting cards would be $400. Variable costs per card are $1 each. The greeting cards will sell for $3 each. Kristie’s break-even point would occur at __________ cards sold. A) 150 B) 200 C) 300 D) 450
164) Jessica wants to know how many units she must sell to cover all of her costs. She indicates to you that her selling price is $25 per unit, her fixed costs are $7,000, and the variable costs per unit are $15. What is her break-even point? A) 400 units B) 500 units C) 700 units D) 1,150 units
165) Melinda owns a company that markets high-quality coffee makers and lunchroom supplies to businesses. She faces stiff competition from larger firms like Walmart. Which competitive strategy would probably work best for Melinda?
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A) Keep costs as low as possible by offering a no-frills approach with little or no extra services. B) Develop a skimming pricing strategy. C) Utilize a high-low approach to pricing with a higher break-even point. D) Focus on nonprice competition by offering excellent service and work on building good customer relationships.
166) As a graphic artist, Samuel has just finished a new calendar. The calendar cost him $1.00 for the glossy paper, $3.00 for the six-color production, and $.50 for the plastic wire that holds it together at the top. The labor in developing the design was 4 hours of work at $50/hour, and labor is being added to the rest of the fixed costs of $500.00. At a price of $15.00 per calendar, how many calendars will Samuel need to produce and sell in order to break even (cover all his costs, but not make a profit)? A) 670 calendars B) 34 calendars C) 46 calendars D) 67 calendars
167) Operating in the southwestern states, Cloud Glider Airlines hopes to avoid entering the price war that currently is taking place between several airlines on the east coast. One strategy to avoid severe price competition and attract customers to fly Cloud Glider is to A) provide frequent travelers the added value of special fringe benefits. B) cut costs and services in order to maintain profit margins. C) reduce flights and in-flight services and lay off employees. D) determine the break-even price and charge slightly more than that.
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168) Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30 percent share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product.
168.1) The company currently markets McDog T-bone, Lapdog Lunchtreats, Rover's Potroast, and Puppy Porterhouse in the dog food market. Prime Cuts will be an addition to the company's __________ in the dog food market. A) product mix B) product line C) product time D) product screen
168.2) Gourmet Pets hopes to use its special packaging and extensive advertising to create a perception in the minds of consumers that Prime Cuts is a superior product, even though the actual quality of meat used in the product is virtually no different from competing brands. The company is attempting to develop A) differential segmentation. B) cognitive dissonance. C) product differentiation. D) pioneer marketing.
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168.3) Prime Cuts was the brainchild of Karen Terrier who guided all the marketing efforts of the product. She selected each element of the marketing mix such as the package, brand name, pricing, promotion, and placement decisions. Karen obviously serves in the job of A) marketing consultant. B) brand manager. C) operations analyst. D) marketing intermediary.
168.4) Gourmet Pets is interested in computing the break-even point for its new product Prime Cuts. The fixed costs of adding this product to the product line amounts to $20,000. Variable costs to produce one package of Prime Cuts are $2. Prime Cuts will sell for $6 per package. The break-even point would be A) 900 units. B) 2,800 units. C) 5,000 units. D) There is not enough information to find the correct answer.
168.5) Gourmet Pets feels its target market is more concerned with perceived quality than actual product cost. They also feel that the newness of this concept offers an opportunity to make high profits since they are the first firm to enter this market, so they face no direct competition. Their decision to charge a high price is consistent with the __________ strategy. A) market pricing B) price leadership C) skimming price D) penetration price
169) When consumers calculate the value of a product, they look at the benefits and then subtract the cost.
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170)
true false
Successful businesses constantly monitor consumer wants and needs. ⊚ true ⊚ false
171) To satisfy consumers, managers must learn to adapt constantly to changing market demands. ⊚ true ⊚ false
172) Once an organization surveys the consumer's wants and needs, has designed a group of products to meet those needs, and has begun to market them in stores, the organization is assured of success. ⊚ true ⊚ false
173) Fast food restaurants are just one example of businesses that must constantly monitor all sources of information for new-product ideas. ⊚ true ⊚ false
174) Fast food restaurants like Taco Bell pride themselves on offering precisely the same menu around the world so that customers know exactly what to expect when they eat at one of those restaurants. ⊚ true ⊚ false
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175)
Product development is a key activity in any modern business, anywhere in the world. ⊚ true ⊚ false
176) From a strategic marketing viewpoint, a total product offer includes all of the tangible attributes of a good or service and excludes any intangible attributes. ⊚ true ⊚ false
177)
The image created by advertising is part of the total product offer of a product. ⊚ true ⊚ false
178) The reputation of the manufacturer and the retail store surroundings are considered part of the value enhancers of a total product offer. ⊚ true ⊚ false
179) Price, store surroundings, service, and brand name are all elements that consumers evaluate in a total product offer. ⊚ true ⊚ false
180) Successful marketers attempt to think like consumers and evaluate the total product offer as a collection of impressions created by all parts of the value package. ⊚ true ⊚ false
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181) The most important component of a total product offer for any business is always a low price. ⊚ true ⊚ false
182)
Low prices can often help retailers create an attractive total product offer. ⊚ true ⊚ false
183) In evaluating a total product offer, value enhancers such as service, guarantees, reputation of the seller, etc. are as important to customers as the basic product. ⊚ true ⊚ false
184) A firm's product line refers to all of the different geographic markets in which it sells the same good or service. ⊚ true ⊚ false
185)
A single product line may contain several competing brands. ⊚ true ⊚ false
186) The term product line describes the combination of product mixes offered by a manufacturer. ⊚ true ⊚ false
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187)
A product line consists of products specified for a similar market. ⊚ true ⊚ false
188) The various product lines that a company offers for sale make up that organization's product mix. ⊚ true ⊚ false
189)
While service providers offer product lines, they are unable to offer product mixes. ⊚ true ⊚ false
190) Salads, bagels, sandwiches, soups, and pastries are products that might be included in the product mix of a cafe. ⊚ true ⊚ false
191) Car dealers know to focus exclusively on price and warranty because that is all most consumers consider in a new car purchase. ⊚ true ⊚ false
192) A bank's product line would include customer safety deposit boxes, business loans, and student internships. ⊚ true ⊚ false
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193) The concepts of product lines and product mixes apply to marketers of both products and services. ⊚ true ⊚ false
194) According to the box “Connecting Through Social Media,” businesses can benefit from social media sites like Instagram not only to sell a product but also to find out what the customer wants. ⊚ true ⊚ false
195) A traditional McDonald's and a McCafé are examples of the McDonald's Corporation product mix. ⊚ true ⊚ false
196) At Simpson Home Theater stores, all new products are offered with an extended service contract, as well as free delivery and installation. By offering these value enhancers, Simpson’s has added to their total product offer. ⊚ true ⊚ false
197) Miller Light Beer, Maxwell House Coffee, Jell-O brand gelatin, Kraft mayonnaise, and Marlboro cigarettes were all at one time products of the Philip Morris Company. When grouped together, these products represented a part of the product line Philip Morris offered. ⊚ true ⊚ false
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198) In order for product differentiation to be effective, major product differences must be identified so that one product is clearly better than others. ⊚ true ⊚ false
199) Marketers use pricing, advertising, and packaging to differentiate their products from competitors' products even when actual differences are quite small. ⊚ true ⊚ false
200)
Creative product differentiation can enable a small business to increase market share. ⊚ true ⊚ false
201) The most common classification of consumer goods and services is based on producer or manufacturer behavior in the market. ⊚ true ⊚ false
202) One common way of classifying consumer goods is based on consumer purchasing behavior. ⊚ true ⊚ false
203) The uniqueness of convenience goods and services requires consumers to make an extra effort to purchase them.
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true false
204) Convenience goods are products that the consumer must buy in-store as opposed to online. ⊚ true ⊚ false
205)
The characteristics of specialty goods restrict their effective sale online. ⊚ true ⊚ false
206)
Unsought goods and services fail to provide the benefits consumers expect. ⊚ true ⊚ false
207) Unsought goods and services are products consumers do not actively seek out for purchase on a regular basis. ⊚ true ⊚ false
208)
The marketing efforts for convenience and specialty goods are essentially the same. ⊚ true ⊚ false
209) Shopping goods and services are purchased only after consumers compare value, quality, style, and price of competing goods and services.
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⊚ ⊚
true false
210) Successful marketing of convenience and specialty goods requires different marketing mixes. ⊚ true ⊚ false
211)
Most consumers view specialty goods as having a variety of acceptable substitutes. ⊚ true ⊚ false
212) The classification of goods or services into a particular class depends on the individual consumer. ⊚ true ⊚ false
213)
A shopping good for one consumer could be a specialty good for another consumer. ⊚ true ⊚ false
214)
Specialty goods are often marketed through specialty magazines. ⊚ true ⊚ false
215)
Some goods can be classified as either consumer goods or as industrial goods.
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216)
true false
Industrial goods are sold in the B2B market. ⊚ true ⊚ false
217) As a promotional strategy, advertising is more important in the marketing of industrial goods than it is in the marketing of consumer goods. ⊚ true ⊚ false
218)
Capital items are industrial goods that must be replaced frequently. ⊚ true ⊚ false
219)
Industrial goods and services are used to produce other products. ⊚ true ⊚ false
220) Accessory equipment consists of capital items that cost less and are shorter lived than installation items. ⊚ true ⊚ false
221)
The two types of industrial goods are production goods and unsought goods.
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222)
true false
A computer can be a consumer good but not an industrial good. ⊚ true ⊚ false
223) Paper clips, stationery, and other office supplies used by businesses are types of industrial supply goods. ⊚ true ⊚ false
224)
A pickup truck can be classified as either a consumer good or an industrial good. ⊚ true ⊚ false
225) Newspapers are sold daily in a wide variety of locations. This widespread distribution suggests that newspapers are classified as convenience goods. ⊚ true ⊚ false
226) Unsought goods and services are purchased on impulse and provide no added value to consumers. ⊚ true ⊚ false
227)
Consumers expect to find specialty goods in convenient locations.
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⊚ ⊚
true false
228) Kendrick is the owner of a small sandwich shop and draws a variety of competition— from other local restaurants offering sandwiches to the large national chains. The small size of Kendrick’s business prevents him from successfully utilizing a product differentiation strategy. ⊚ true ⊚ false
229) Since On-the-Spot Furniture Service offers home and commercial cleaning services no different from competitors, the company would be unable to utilize a product differentiation strategy. ⊚ true ⊚ false
230) Sunny Day Yogurt, a national producer of Greek yogurt, wants to differentiate its products from those of other providers. To implement this strategy successfully will require Sunny Day to create tangible differences in the physical product it offers. ⊚ true ⊚ false
231) Vince expects to visit a variety of retailers and websites to compare features, quality, and prices of different television brands. This behavior indicates that for Vince, a television is a shopping good. ⊚ true ⊚ false
232) Evie strongly prefers a specific brand of herbal tea. Since there is only one store in her area that sells her brand, she makes an extra effort to purchase this item. Evie’s purchasing behavior indicates for her this product is a specialty good.
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true false
233) Mother Earth Equipment Company sells used heavy construction equipment such as bulldozers and cranes. Mother Earth products represent examples of an accessory equipment industrial good. ⊚ true ⊚ false
234) Third State Bank purchased several new computers and laser printers for office use. These items would be correctly classified as accessory equipment. ⊚ true ⊚ false
235)
Packaging is an important part of the total product offer. ⊚ true ⊚ false
236)
One function of effective packaging is to attract the attention of consumers. ⊚ true ⊚ false
237) One function of effective packaging is to protect the goods inside during handling and storage, as well as deter product tampering and theft. ⊚ true ⊚ false
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238) One function of effective packaging is to provide information regarding warranties, benefits, and uses of the good inside the package. ⊚ true ⊚ false
239) More than any other component of a total product offer, technology has reduced the importance of packaging. ⊚ true ⊚ false
240) Changes in packaging can transform the product in the minds of consumers and open larger market opportunities. ⊚ true ⊚ false
241)
While packaging innovations benefit the consumer, they have little effect on retailers. ⊚ true ⊚ false
242)
Packaging considerations are not taken into account for promotional efforts. ⊚ true ⊚ false
243)
The exclusive function of packaging is to protect the product from damage in transit. ⊚ true ⊚ false
244)
Today, the packaging of products has been given a greater role in product promotion.
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245)
true false
The trend toward self-service retailers has increased the importance of packaging. ⊚ true ⊚ false
246) Due to increased advertising and better-trained salespeople, packaging is less important than in the past. ⊚ true ⊚ false
247)
An RFID chip allows for only one product bar code to be read at a time. ⊚ true ⊚ false
248) While the Universal Product Code (UPC) improves efficiency at the retail checkout counter, it has increased problems in controlling inventory. ⊚ true ⊚ false
249) Insta-Pasta designed a new type of packaging that significantly improves taste and texture of the pasta when it’s microwaved by the consumer. Unfortunately, firms seldom find that improvements in packaging impact market share or profits. ⊚ true ⊚ false
250)
A brand includes practically all means of identifying a product.
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true false
251)
The purpose of a brand name is to establish an image of generic goods or services. ⊚ true ⊚ false
252)
Brand names can significantly impact consumer perceptions of a product. ⊚ true ⊚ false
253) A trademark is a brand that has been given exclusive legal protection for both the brand name and the pictorial design. ⊚ true ⊚ false
254) The benefits provided by a brand name for a buyer include reduced search time, prestige, and quality assurance. ⊚ true ⊚ false
255)
Trademark protection means a product is legally protected for its brand name and design. ⊚ true ⊚ false
256) Brand names can help sellers with new-product introductions and create an opportunity for higher prices.
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true false
257) Dealer (private) brands are products that do not carry the manufacturer's name, but rather carry the name of a distributor or retailer. ⊚ true ⊚ false
258)
Cheerios is an example of a generic name in the cereal market. ⊚ true ⊚ false
259) Manufacturers' brands carry the brand name of the producers that distribute the products nationally. ⊚ true ⊚ false
260)
Most manufacturers hope that their brand names will become a generic name. ⊚ true ⊚ false
261) Sales of generic products are decreasing because consumers prefer the higher quality of the nationally known brands. ⊚ true ⊚ false
262) Knockoff brands have the legal right to use the same name for a product as the original brand.
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⊚ ⊚
true false
263) The use of price discounts and coupons may erode the commitment of consumers to brand names. ⊚ true ⊚ false
264)
Brand loyalty reflects the level to which consumers are committed to further purchases. ⊚ true ⊚ false
265)
A knockoff brand is a brand name that has lost its exclusive legal protection. ⊚ true ⊚ false
266)
Brand awareness refers to the value of the brand name and associated symbols. ⊚ true ⊚ false
267) Brand loyalty refers to the degree to which customers are satisfied with a brand and are committed to further purchases. ⊚ true ⊚ false
268)
Although their names are similar, brand loyalty and brand equity are unrelated.
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true false
269) When consumer loyalty reaches the point of brand insistence, the product becomes a specialty good. ⊚ true ⊚ false
270) Event sponsorship like the Capital One Orange Bowl football game helps improve brand awareness. ⊚ true ⊚ false
271)
Price, appearance, and reputation can influence a consumer's perceptions of quality. ⊚ true ⊚ false
272)
Endorsements by sports or other celebrities can help create a favorable brand association. ⊚ true ⊚ false
273) Brand association is displayed when a consumer quickly comes up with a particular brand name after someone mentions a product category. ⊚ true ⊚ false
274) Brand managers have direct responsibility for all the elements of the marketing mix for a particular brand or product line.
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true false
275) Firms use brand managers or brand teams to give them greater control over both newproduct development and product promotion. ⊚ true ⊚ false
276)
Private-label brands are also known as distributor brands. ⊚ true ⊚ false
277) While brand managers are responsible for the product and promotion elements of the marketing mix, finance managers are responsible for the price element. ⊚ true ⊚ false
278) According to the box “Reaching Beyond Our Borders,” brand names must hold great meaning or customers will not acknowledge them. ⊚ true ⊚ false
279) Come and Go Shoppe offers customers tissues, snack items, cleaning products, and various drink mixes in basic packaging with no identified brand. These goods are popular with the more cost-conscious shoppers because they are significantly less expensive than nationally known brand names. These are examples of generic goods. ⊚ true ⊚ false
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280) Hudson Home Center, a national chain of home remodeling stores, sells a line of lighting under the Hudson’s brand that was produced for them by another firm. The Hudson lighting is an example of a knockoff brand. ⊚ true ⊚ false
281) TrimTop manufactures and sells purses. Marketing research indicates luxury is the attribute that consumers most desire in this product. TrimTop now emphasizes luxury in all its promotional efforts. This strategy is intended to build brand equity. ⊚ true ⊚ false
282) Marlo works for Rite-Way Sports and oversees the marketing mix for the firm's line of mountain climbing gear. Marlo serves as a brand manager for Rite-Way Sports. ⊚ true ⊚ false
283)
New-product failures are most often caused by excessively high prices. ⊚ true ⊚ false
284)
New products often fail because they don't deliver to consumers their promised benefits. ⊚ true ⊚ false
285)
Firms should listen to their suppliers for new-product ideas.
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true false
286) Employees, not the firm's research and development department, are the number one source of ideas for new industrial products. ⊚ true ⊚ false
287) Product testing is designed to reduce the number of new-product ideas that a firm works on at any one time. ⊚ true ⊚ false
288) In the new-product development process, product analysis is completed prior to the product screening stage. ⊚ true ⊚ false
289) The product analysis stage of the new-product development process considers the sales forecasts and cost estimates of a new-product idea. ⊚ true ⊚ false
290)
Concept testing involves taking a product idea to consumers to test their reactions. ⊚ true ⊚ false
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291) Social media and company websites are useful in the commercialization process for new products. ⊚ true ⊚ false
292) New-product commercialization includes promoting the product to distributors and retailers as well as developing strong advertising and sales campaigns. ⊚ true ⊚ false
293)
Typically, products that test well will quickly achieve success in the marketplace. ⊚ true ⊚ false
294) At the concept testing stage, factors such as packaging, branding, and ingredients should be tested to ensure that a product is acceptable to potential consumers. ⊚ true ⊚ false
295) Sara’s Bake Shoppe has found that an effective technique to generate ideas for new consumer products is to carefully listen to employees and suppliers. ⊚ true ⊚ false
296) The product life cycle presents a theoretical model describing what happens to sales and profits for a class of products over time. ⊚ true ⊚ false
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297) While the time in each stage may vary, all products progress through each stage of the product life cycle. ⊚ true ⊚ false
298)
The four stages in the product life cycle are introduction, market, exchange, and disposal. ⊚ true ⊚ false
299) Most products remain in the introductory stage of the product life cycle for the same amount of time. ⊚ true ⊚ false
300) Knowledge of the product life cycle model can help firms develop marketing strategies and anticipate market changes. ⊚ true ⊚ false
301) Regardless of where a product is in the life cycle, the marketing strategy must be consistent. ⊚ true ⊚ false
302)
Profits increase during the maturity stage of the product life cycle. ⊚ true ⊚ false
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303) While the product life cycle is a good theory, it's not important for marketers to recognize what life cycle stage a product is in. ⊚ true ⊚ false
304) Successful businesses develop a mix of price, product, place, and promotion that is consistently applied throughout a product's life cycle. ⊚ true ⊚ false
305) Some goods have a product life cycle that is completed in a shorter amount of time than other goods. ⊚ true ⊚ false
306) Cheryl has just taken a job with a local health food group after several years working as a brand manager for an established product. Now, she is responsible for managing the marketing mix for a new product introduction. In her new job, Cheryl discovers while the products may be at different stages of the product life cycle, the marketing strategies remain essentially the same. ⊚ true ⊚ false
307)
As consumers evaluate a product, price plays a small role. ⊚ true ⊚ false
308)
A long-run pricing objective of almost all firms is to optimize profit.
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309)
true false
Sometimes a firm will lower prices below their costs in order to build a customer base. ⊚ true ⊚ false
310) In order to achieve a social objective, firms use low prices to enable people with low incomes to buy their product. ⊚ true ⊚ false
311) Consumer perceptions of product quality are affected by promotions and packaging, but not by the price of the product. ⊚ true ⊚ false
312) Successful firms coordinate pricing objective strategies with decisions regarding product design, packaging, branding, distribution, and promotion. ⊚ true ⊚ false
313)
Firms usually begin by setting the price of their product somewhere just below their cost. ⊚ true ⊚ false
314)
Cost-based pricing adds a desired profit margin to the cost of producing a product.
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315)
true false
In the long run the market determines what the price will be. ⊚ true ⊚ false
316) Target costing adds a profit margin to the estimated cost of production to determine the optimal price. ⊚ true ⊚ false
317)
Demand-based pricing is another name for cost-based pricing. ⊚ true ⊚ false
318)
Target costing is a demand-based pricing strategy. ⊚ true ⊚ false
319) The target costing strategy establishes a selling price that consumers are willing to pay for a product, and then subtracts a desired profit margin to determine a target cost of production. ⊚ true ⊚ false
320) In the long run, the cost of production and the length of the firm's supply chain determine the price of a product.
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⊚ ⊚
true false
321)
Competition-based pricing is a strategy based on what all the other competitors are doing. ⊚ true ⊚ false
322)
Price leadership is a demand-based pricing strategy. ⊚ true ⊚ false
323) Price leadership occurs when one or more dominant firms set pricing practices that other firms in the market follow. ⊚ true ⊚ false
324) The purpose of break-even analysis is to determine the lowest price a firm can charge and still be able to cover its costs of production. ⊚ true ⊚ false
325)
Break-even analysis determines profitability of a firm at various levels of sales. ⊚ true ⊚ false
326)
The break-even point is that level of sales where total revenues equals total costs.
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⊚ ⊚
true false
327)
Total fixed costs are those costs that change when the volume of production changes. ⊚ true ⊚ false
328)
Variable costs are costs that change with the level of inventory. ⊚ true ⊚ false
329) A skimming price strategy involves a low pricing policy intended to attract pricesensitive customers from competitors. ⊚ true ⊚ false
330) A penetration price strategy calls for a firm to charge low prices with the intent of attracting a large number of customers and discouraging competition. ⊚ true ⊚ false
331) Firms utilizing an everyday low pricing (EDLP) strategy establish a policy of special sales on a regular basis. ⊚ true ⊚ false
332) A high-low pricing strategy may condition consumers to avoid paying the regular prices by waiting for sale prices.
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⊚ ⊚
true false
333) As more sales move to online retailers, it is likely that firms will adopt a high-low pricing strategy. ⊚ true ⊚ false
334) Psychological pricing involves pricing goods to make them appear less expensive than they are. ⊚ true ⊚ false
335) Any costs associated with future product updates do not need to be taken into consideration when setting the price of the original product. ⊚ true ⊚ false
336) The key to demand-oriented pricing is the recognition that not all producers face the same costs of production. ⊚ true ⊚ false
337)
Marketers often try to find ways to compete on product attributes other than price. ⊚ true ⊚ false
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338) When a company bases its pricing by setting prices that are used by the dominant firms in the industry, it is practicing demand-based pricing. ⊚ true ⊚ false
339) Companies that introduce new products with a low price to discourage other companies from making the same product are using a skimming pricing strategy. ⊚ true ⊚ false
340) One way firms can gain a competitive advantage without relying on low prices is by providing excellent service to their customers. ⊚ true ⊚ false
341) The pricing objectives of a firm should be set independently of the other elements of their marketing mix. ⊚ true ⊚ false
342) When a company establishes the price it charges for its products by determining the cost of production and then adding on a desired profit margin, it is known as target costing. ⊚ true ⊚ false
343) Rather than having frequent special sales, a company maintains lower prices than competitors all the time. This pricing strategy is known as everyday low prices (EDLP). ⊚ true ⊚ false
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344) Mariana owns and operates the Pure Clean Laundry Center. She charges $12 per week for three loads of laundry. Her fixed costs are $850 per month, while her variable costs per laundry load amount to $2. Pure Clean Laundry must service 60 customers to break even. ⊚ true ⊚ false
345) Tremont, owner and operator of a donut shop, is working on a break-even analysis. His fixed costs would include rent, insurance, and property taxes. ⊚ true ⊚ false
346) Heidi, owner and operator of Kansas City BBQ, is working on a break-even analysis. The cost of pickles, onions, buns, sauce, and meat would all be considered variable costs for her type of business. ⊚ true ⊚ false
347) Lila is a marketing manager for Tremont Manufacturing. Her boss asked her to evaluate a new-product idea. One of the things Lila wants to determine is how much of this product her firm would have to sell in order to break even. In order to compute this break-even level of sales, she will need to know the price of the good, the total fixed costs, and variable cost of producing each unit. ⊚ true ⊚ false
348) Glenwood Industries is one of the first producers of a unique consumer product. The company has chosen a low-price strategy, hoping this will enable them to quickly attract many customers while discouraging potential competitors from entering the market. Glenwood’s approach to pricing is a classic example of the skimming strategy.
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⊚ ⊚
true false
349) Bradley Electric is the dominant firm in the home electronics market. When Bradley announces an increase in the prices of its home theater products, Simpson and Trox, the smaller firms in the market, usually quickly announce similar price increases for their own products. This situation is an example of demand-oriented pricing. ⊚ true ⊚ false
350) Grace’s Garden Design Center is located in a large town that has several other large bigbox garden centers. Grace is likely to find that the presence of many larger competitors means that the only way she can survive is to charge rock-bottom prices. ⊚ true ⊚ false
351) Brett’s Wraps ’n More Food Truck advertises that they are the "friendliest food truck in town." Though their prices are no lower than the rates of competitors, they put a great deal of emphasis on getting to know the needs of their customers. They tailor their efforts to meet these needs, providing excellent food and service that exactly matches the customer's expectations. Wraps ’n More is likely to find that this approach is more effective in achieving its goals than the use of aggressive price cutting. ⊚ true ⊚ false
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Answer Key Test name: chapter 14 5) C 6) B 7) A 8) A 9) D 10) B 11) B 12) C 13) B 14) C 15) A 16) D 17) A 18) B 19) C 20) B 21) D 22) B 23) B 24) C 25) D 26) A 27) A 28) D 29) C 30) C
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31) D 32) B 33) C 34) A 35) D 36) C 37) B 38) D 39) B 40) C 41) C 42) B 43) B 44) A 45) A 46) D 47) B 48) A 49) B 50) C 51) B 52) A 53) D 54) C 55) C 56) A 57) C 58) B 59) D 60) A
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61) C 62) A 63) D 64) C 65) A 66) C 67) C 68) A 69) C 70) D 71) A 72) A 73) B 74) D 75) C 76) B 77) A 78) A 79) B 80) C 81) B 82) C 83) C 84) B 85) A 86) C 87) D 88) C 89) D 90) B
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91) A 92) C 93) B 94) C 95) B 96) A 97) C 98) B 99) C 100) B 101) B 102) A 103) B 104) C 105) C 106) B 107) D 108) B 109) B 110) A 111) B 112) B 113) A 114) C 115) C 116) B 117) B 118) A 119) A 120) C
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121) B 122) A 123) A 124) A 125) B 126) C 127) D 128) B 129) C 130) C 131) D 132) D 133) A 134) D 135) D 136) A 137) D 138) C 139) C 140) A 141) D 142) A 143) B 144) D 145) C 146) B 147) B 148) D 149) A 150) C
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151) A 152) B 153) B 154) B 155) C 156) B 157) D 158) D 159) A 160) A 161) D 162) A 163) B 164) C 165) D 166) D 167) A 168) Section Break 168.1) B 168.2) C 168.3) B 168.4) C 168.5) C 169) TRUE 170) TRUE 171) TRUE 172) FALSE 173) TRUE 174) FALSE 175) TRUE
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176) FALSE 177) TRUE 178) TRUE 179) TRUE 180) TRUE 181) FALSE 182) TRUE 183) TRUE 184) FALSE 185) TRUE 186) FALSE 187) TRUE 188) TRUE 189) FALSE 190) TRUE 191) FALSE 192) FALSE 193) TRUE 194) TRUE 195) TRUE 196) TRUE 197) FALSE 198) FALSE 199) TRUE 200) TRUE 201) FALSE 202) TRUE 203) FALSE 204) FALSE 205) FALSE
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206) FALSE 207) TRUE 208) FALSE 209) TRUE 210) TRUE 211) FALSE 212) TRUE 213) TRUE 214) TRUE 215) TRUE 216) TRUE 217) FALSE 218) FALSE 219) TRUE 220) TRUE 221) FALSE 222) FALSE 223) TRUE 224) TRUE 225) TRUE 226) FALSE 227) FALSE 228) FALSE 229) FALSE 230) FALSE 231) TRUE 232) TRUE 233) FALSE 234) TRUE 235) TRUE
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236) TRUE 237) TRUE 238) TRUE 239) FALSE 240) TRUE 241) FALSE 242) FALSE 243) FALSE 244) TRUE 245) TRUE 246) FALSE 247) FALSE 248) FALSE 249) FALSE 250) TRUE 251) FALSE 252) TRUE 253) TRUE 254) TRUE 255) TRUE 256) TRUE 257) TRUE 258) FALSE 259) TRUE 260) FALSE 261) FALSE 262) FALSE 263) TRUE 264) TRUE 265) FALSE
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266) FALSE 267) TRUE 268) FALSE 269) TRUE 270) TRUE 271) TRUE 272) TRUE 273) FALSE 274) TRUE 275) TRUE 276) TRUE 277) FALSE 278) FALSE 279) TRUE 280) FALSE 281) TRUE 282) TRUE 283) FALSE 284) TRUE 285) TRUE 286) TRUE 287) FALSE 288) FALSE 289) TRUE 290) TRUE 291) TRUE 292) TRUE 293) FALSE 294) TRUE 295) TRUE
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296) TRUE 297) FALSE 298) FALSE 299) FALSE 300) TRUE 301) FALSE 302) FALSE 303) FALSE 304) FALSE 305) TRUE 306) FALSE 307) FALSE 308) TRUE 309) TRUE 310) TRUE 311) FALSE 312) TRUE 313) FALSE 314) TRUE 315) TRUE 316) FALSE 317) FALSE 318) TRUE 319) TRUE 320) FALSE 321) TRUE 322) FALSE 323) TRUE 324) FALSE 325) TRUE
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326) TRUE 327) FALSE 328) FALSE 329) FALSE 330) TRUE 331) FALSE 332) TRUE 333) FALSE 334) TRUE 335) FALSE 336) FALSE 337) TRUE 338) FALSE 339) FALSE 340) TRUE 341) FALSE 342) FALSE 343) TRUE 344) FALSE 345) TRUE 346) TRUE 347) TRUE 348) FALSE 349) FALSE 350) FALSE 351) TRUE
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Student name:__________ 1) Explain why you agree or disagree with the following statement: "Marketing intermediaries must charge a high enough price for the functions they perform to earn a profit. Therefore, the cost of distributing goods can almost always be reduced by eliminating marketing intermediaries from the channel of distribution."
2) What is utility? What are the major types of utility? Give an example of how marketing intermediaries can provide each type of utility.
3) What is a wholesaler? Describe the difference between merchant wholesalers and agents and brokers. Identify three types of limited-function wholesalers.
4) Retail distribution strategies can take three different forms. Identify the three forms and give examples of products that would be marketed using each strategy.
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5) Identify and describe the four basic types of distribution systems that are used to link firms in a formal relationship.
6) What is logistics? Describe the types of issues you might deal with if you specialized in logistics.
7) Those organizations that assist in the movement of goods and services from producer to industrial and consumer users are known as A) product managers. B) buying agents. C) marketing intermediaries. D) production analysts.
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8) A __________ consists of the marketing intermediaries that transport and store goods as they move through their path from producer to final user. A) channel of distribution B) marketing network C) marketing mix D) wholesaler
9)
A __________ is a marketing intermediary that sells products to other organizations. A) wholesaler B) retailer C) consumer D) jobber
10)
A __________ is a marketing intermediary that sells to ultimate consumers. A) buying agent B) wholesaler C) secondary marketer D) retailer
11) A(n) __________ is one type of marketing intermediary that brings together buyers and sellers and assists in negotiating an exchange but does not take title to the goods. A) agent B) retailer C) drop shipper D) merchant wholesaler
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12)
What is a characteristic of marketing intermediaries?
A) They are unlikely to survive in a competitive global economy. B) They have survived because they can often perform marketing functions faster and at lower cost than producers. C) They create value, but this value is seldom great enough to justify the added cost they charge for their services. D) They tend to increase the number of exchange relationships producers and consumers must deal with in order to buy and sell goods.
13)
Marketing intermediaries are important because they A) add value that exceeds the cost of their services. B) add cost that exceeds the value they provide. C) increase the number of exchange relationships in the channel. D) eliminate any exchange efficiencies.
14)
Some economists believe that intermediaries add A) value. B) service. C) costs. D) profits.
15)
Which statement about channels of distribution is most accurate?
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A) Channels of distribution always begin with a manufacturer and end with consumers, and always have one or more marketing intermediaries in between. B) Channels of distribution always include retailers, but they may or may not also include wholesalers. C) The fewer the marketing intermediaries in a channel of distribution, the more efficient the channel is likely to be. D) Some channels of distribution include marketing intermediaries, while in others a manufacturer sells directly to the final consumer.
16) About __________ of the costs of things we buy are marketing costs that go to pay for distribution costs of intermediaries. A) 25 percent B) 30 percent C) 75 percent D) 90 percent
17)
The primary difference between retailers and wholesalers is that A) retailers sell consumer goods, while wholesalers sell industrial goods. B) retailers operate in local areas, while wholesalers operate over a wide geographic
area. C) retailers sell to final consumers, while wholesalers sell to other organizations, such as retailers or manufacturers. D) retailers have sales of less than $100 million, while wholesalers have sales of $100 million or more.
18)
Which statement about marketing intermediaries is accurate?
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A) All channels of distribution must contain at least one marketing intermediary. B) Marketing intermediaries and their functions can be eliminated. C) Marketing intermediaries survive because they can perform marketing functions faster and more cheaply than producers and consumers. D) The costs added to products by marketing intermediaries usually exceed the value they add to products.
19) Jennae, owner of a jewelry shop in a small shopping center, sells jewelry produced by a national company. Jennae sells to final customers, so she is a A) merchant wholesaler. B) retailer. C) rack jobber. D) channel captain.
20) Rob is convinced that his product idea has tremendous potential. He has decided to produce the product himself but plans to use other firms who specialize in storing and transporting to help him move the product along its path to the final consumer. These specialists Rob uses will be part of his A) focus group. B) market network. C) channel of distribution. D) franchise system.
21) Suppose that nine dairy producers each tried to sell their products directly to eight ice cream shops. The total number of exchange relationships that would be established is
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A) 22. B) 56. C) 72. D) 96.
22) Cliff claims he found a definite way to save money, "Buy direct from the manufacturer. Any time intermediaries get involved, you will pay a higher price. After all, every intermediary involved in the marketing process must charge enough to earn a profit." What do you make of Cliff’s claim? A) It is entirely correct. Intermediaries must charge a high enough price for the activities they perform to earn a profit, so using intermediaries must result in a higher price. B) It is impractical, because in most markets the distribution process is so complex that it is impossible to determine who the actual producer really is. C) It is not valid in many cases. Intermediaries do add costs to products, but they also create value by performing marketing functions efficiently. In many cases the value they create more than offsets the costs they add. D) It is never true. Markets that make use of intermediaries can always provide goods at lower cost than those that rely on direct distribution.
23) Mario brings together buyers and sellers of used farm implement equipment and helps them negotiate the terms of the sale. However, he never takes title to any of the equipment himself, nor does he provide any financing for the buyer. Mario is acting as a A) channel captain. B) broker. C) wholesaler. D) logistics specialist.
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24) Marketing managers at Fast Track Motor Sports are looking for ways to cut costs as the company is facing intense competitive pressure. They are considering a plan to cut distribution costs by eliminating marketing intermediaries from the channel of distribution. If Fast Track does this, it is likely to find that A) most of the marketing functions performed by marketing intermediaries are helpful, but they aren't really necessary. B) as the producer of the products, it will be able to perform the same functions more efficiently. C) it will be unable to perform the functions as efficiently as they were performed by the marketing intermediaries. D) telemarketing will become the only viable means of distributing its products.
25) __________ is the value or want-satisfying ability that is added to products by organizations that make the product more useful or accessible to consumers. A) Utility B) Reliability C) Functionality D) Consistency
26)
__________ utility is usually provided by producers rather than marketers. A) Possession B) Time C) Place D) Form
27)
The types of utility commonly provided by marketing intermediaries include
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A) product, price, place, and promotion. B) time, place, possession, information, and service. C) retailing, wholesaling, brokering, and financing. D) cost, value, flexibility, use, and resale.
28) When marketing intermediaries perform the steps necessary to transfer ownership from one party to another, they are providing __________ utility. A) secondary B) title C) possession D) registration
29) Placing ads in newspapers and having knowledgeable salespeople to answer customers' questions are ways marketing intermediaries can provide A) form utility. B) possession utility. C) time utility. D) information utility.
30) One way a store selling home medical equipment might add __________ utility is to provide convenient delivery and setup to customers. A) possession B) form C) conditional D) time
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31) Marketing intermediaries add __________ utility to products by having them available when consumers want them. A) time B) service C) response D) form
32) __________ utility adds value to goods by having them available where people want them. A) Form B) Possession C) Place D) Demographic
33)
Retailers who have stores at convenient locations are trying to add value by A) eliminating an intermediary. B) using a broad resource allocation strategy. C) providing place utility. D) achieving market concentration.
34) One way traditional retailers have maintained customers in the face of increasing competition from online sellers and other direct markers is to place more emphasis on providing __________ utility. A) time B) place C) service D) form
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35) Marketing intermediaries can provide __________ utility by offering customers affordable credit, free delivery, and product guarantees. A) possession B) information C) form D) promotion
36) Stores that remain open 24 hours, seven days a week, are providing __________ utility to their customers. A) possession B) time C) service D) schedule
37)
Which statement about service utility is most accurate? Service utility is
A) becoming less important to retailers in this age of self-service marketing. B) the one type of utility that online firms provide more efficiently than traditional retailers. C) more likely to be provided by wholesalers than by retailers. D) becoming crucial to traditional retailers as they try to prevent their customers from defecting to firms using direct marketing.
38) According to the box “Spotlight on Small Business,” __________ has/have made it easier for doctors and patients to connect outside of the traditional doctor’s office.
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A) technology B) logistics C) demographics D) kiosks
39) Zola is an online company that helps people with the complex task of planning a wedding. Multiple vendors are recommended for things like flowers, caterers, wedding gowns, and more. Through Zola, a couple can establish a website that acts as a registry. Once the couple is married, the website directs them to another site having to do with beginning married life. What type of utilities is this site providing to its users? A) form and service B) service and time C) service and information D) form and information
40) Home e-Source, a chain of stores that specializes in top-of-the-line personal computers and electronics, has over 150 stores in large cities throughout the Southeast and Midwest. Home e-Source picked the locations of its stores so that most customers living in upper middle class and wealthy neighborhoods can get to a location in under 15 minutes. Home e-Source is providing its customers with A) form utility. B) time utility. C) place utility. D) information utility.
41) Air-Tight Windows and Doors offers customers who buy their products free delivery and low installation charges. The company also offers a free follow-up inspection of the new installations after one month. These services are ways that Air-Tight provides its customers with __________ utility.
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A) possession B) time C) secondary D) information
42) At Winkelman’s Wharf, the butchers hand cut fish to the thickness their customers specify and remove any bones. This extra service provides __________ utility. A) possession B) form C) secondary D) time
43)
__________ wholesalers are independently owned and take title to the goods they handle. A) Marketing B) Merchant C) Agent D) Primary
44)
The two basic types of merchant wholesalers are A) full-service wholesalers and limited-function wholesalers. B) functional wholesalers and distributive wholesalers. C) independent wholesalers and subsidiary wholesalers. D) capital wholesalers and full-value wholesalers.
45)
__________ are merchant wholesalers who perform all the distribution functions.
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A) Retailers B) Jobbers C) Total-capacity wholesalers D) Full-service wholesalers
46) Marketing intermediaries that solicit orders from retailers or other wholesalers and have the products delivered directly from the producer to the buyer are known as A) drop shippers. B) truck jobbers. C) channel captains. D) merchandise agents.
47) __________ are limited-function wholesalers who furnish shelves full of merchandise to retailers who sell these items on consignment. A) Cash-and-carry wholesalers B) Rack jobbers C) Merchandise forwarders D) Consignment agents
48) Limited-function wholesalers that mainly serve small businesses by selling them a limited assortment of goods are known as A) rack jobbers. B) consolidated wholesalers. C) cash-and-carry wholesalers. D) drop shippers.
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49) Unlike merchant wholesalers, __________ never actually own the goods they help to distribute. A) rack jobbers B) retailers C) cash-and-carry wholesalers D) agents and brokers
50) __________ may represent several producers in a specific territory, as long as they do not represent competing products. A) Consignment brokers B) Sales contractors C) Manufacturer's agents D) Freight forwarders
51) The main way __________ differ from agents is that they do not develop long-term relationships with the buyers or sellers they assist. A) brokers B) rack jobbers C) wholesalers D) retailers
52)
Which activity would drop shippers be most likely to perform?
A) provide delivery services from a wholesaler's warehouse to a retailer's store B) solicit orders from a retailer and arrange for the producer to make the deliveries C) manage a large stock of items in a single product category, and make large volume shipments to other intermediaries using rail or truck D) provide brokerage services by helping other wholesalers negotiate deals
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53)
Which statement provides the most accurate distinction between an agent and a broker?
A) Agents represent final buyers while brokers represent marketing intermediaries. B) Agents represent one manufacturer in a large sales area, while brokers represent several different manufacturers in a smaller area. C) Agents develop a long-term relationship with the people they represent, while brokers are usually hired on a temporary basis. D) Agents take title to the goods they help distribute, while brokers never assume ownership of the products they distribute.
54) QuickStop sells a variety of grab-and-go snack items to small retail stores. The fact that it sells only to other firms and not to consumers indicates that QuickStop engages only in A) wholesale sales. B) mass marketing. C) pure retailing. D) online retailing.
55) Monica stocks several local supermarkets and discount stores with Satin Smooth Lotions. At the stores, she sets up displays of products carrying the Satin Smooth brand name, and sells the goods on consignment, sharing any profits on the sales with the retailer. Monica can be identified as a A) cash-and-carry wholesaler. B) retailer. C) broker. D) rack jobber.
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56) Coleman’s Mattress Distributors does not manufacture mattresses itself, nor does it even store or handle any mattresses. Instead, Coleman’s solicits orders for mattresses from other firms, then purchases the required amount from suppliers and directs them to ship the mattresses to its customers. What is Coleman’s? A) drop shipper B) rack jobber C) cash-and-carry wholesaler D) limited distribution broker
57)
Which scenario is the best example of a broker?
A) Porter Pipe Supply does not actually store, handle, or deliver pipes, but rather solicits orders from retail hardware and home improvement stores, takes title to the pipes, then arranges for them to be shipped directly from manufacturers to the retail stores. B) Sanjay Driscoll helps buyers and sellers of used highway construction equipment negotiate the terms and conditions of their transactions, but does not actually take title to any of the equipment, nor does he develop long-term relationships with the buyers or sellers. C) Marcus Gowan is not an employee of Serve and Volley Tennis Corp., but he solicits sales for their products at tennis and sporting goods stores in a fairly large sales territory. D) Corinne Hadley is employed by a gutter replacement company and goes door-to-door selling products produced by her company.
58)
Discount stores, supermarkets, and department stores are all common types of A) multilevel marketers. B) full-service wholesalers. C) retail stores. D) broker agents.
59) A(n) __________ sells general merchandise directly from the manufacturer at a discount; items may be discontinued or have certain product flaws.
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A) department store B) discount store C) outlet store D) specialty store
60)
Discount stores owe much of their success to a competitive strategy based on A) low prices. B) extra service. C) special credit arrangements. D) a wide selection in a limited number of categories of goods.
61)
Retailers such as jewelry stores, shoe stores, and bicycle shops are A) department stores. B) discount stores. C) warehouse clubs. D) specialty stores.
62) A __________ offers a huge selection of one type of product (such as books, toys, or sporting goods) to dominate that category of goods. A) department store B) category killer store C) convenience store D) cash-and-carry retailer
63) A firm that wants to distribute its products in the widest market possible would use a(n) __________ distribution strategy.
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A) extensive B) warehouse C) universal D) intensive
64) A(n) __________ distribution strategy distributes a product through only a preferred group of retailers in a given area. A) intensive B) selective C) exclusive D) restrictive
65) area.
A(n) __________ distribution strategy uses only one retail outlet in a given geographic
A) selective B) restrictive C) exclusive D) solitary
66) Producers of snack foods (such as candy bars or potato chips) are most likely to use a(n) __________ distribution strategy for their products. A) intensive B) exclusive C) selective D) restrictive
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67)
__________ are typically distributed using an intensive strategy. A) Computers B) Luxury cars C) Men's suits D) Magazines
68)
Which firm would be most likely to use a selective distribution strategy for its products? A) newspaper publisher B) maker of kitchen appliances C) luxury RV manufacturer D) maker of snack foods such as potato chips and pretzels
69) Producers who use an exclusive distribution strategy for their products can expect retailers who carry the products to A) carry a large inventory of their product. B) provide limited service and delivery for their product. C) sell their products at substantially discounted prices. D) sell their products in a vending machine.
70) After developing a new running shoe, Geoff and Carli were fortunate to get the attention of a large online retailer. The retailer was willing to fund the production of the running shoes abroad, as long as the designers agreed to sell their shoes through its outlets. The retailer was asking Geoff and Carli to agree to A) intensive distribution. B) exclusive distribution. C) multilevel distribution. D) selective distribution.
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71) Office World Inc. operates a chain of very large stores that offer an incredible selection of office supplies at very competitive prices. When Office World opens its first store in a new region, smaller office supply stores almost always experience a noticeable drop in sales. Office World stores can be classified as A) warehouse clubs. B) department stores. C) category killers. D) full-service wholesalers.
72) Having just finalized its new computer monitor design, This Way Computing’s marketing team plans to begin a limited-time rollout with __________ to only one traditional retailer in the tri-state area. This strategy will give consumers the perception of the product's stand-out personality and increase demand. This Way will continue with __________ for the next four months, where it plans to distribute to three other retailers as well. For the last six months of the year, it will initiate distribution agreements with discount retailers and online retailers, and any other electronics store that wants to carry it. The marketing team is confident that the monitor will cycle through the first three stages of its product life cycle quickly. As the computer monitor reaches maturity during the second half of its first year in the market, it is good strategy to proceed with __________, as described here. A) mono-level distribution; secondary level distribution; tertiary level distribution B) intensive distribution; selective distribution; exclusive distribution C) tertiary level distribution; secondary level distribution; mono-level distribution D) exclusive distribution; selective distribution; intensive distribution
73) Vera is the publisher of Small Space Gardening, which is a publication targeted to avid gardeners living in places that aren’t garden-friendly. Because it is a small, new publication, some of the larger bookstores, convenience stores, and newsstands are not agreeing to distribute the magazine. Vera is very concerned by this trend, because she believes that her publication, like most magazines, needs __________ distribution in order to succeed.
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A) selective B) exclusive C) intensive D) exhaustive
74) Lucky Boots produces top-quality designer fashion boots, created for the person concerned about style. Lucky Boots gives only a few preferred retailers in a given market area the right to market its product. Lucky Boots uses A) intensive distribution. B) selective distribution. C) exclusive distribution. D) limited function distribution.
75) Platinum Automobiles produces some of the most luxurious and expensive cars in the world. Typically, only a single dealership is authorized to sell its cars in certain major cities. In less populous areas, Platinum authorizes a single dealer for an entire state or region. The manufacturer of Platinum Automobiles is using a(n) __________ distribution strategy for its product. A) intensive B) primary C) extrinsic D) exclusive
76)
__________ means selling goods and services to ultimate consumers over the Internet. A) Online retailing B) B2B distribution C) Wholesaling D) Brokering
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77)
__________ is the sale of goods and services by telephone. A) Multilevel marketing B) Wholesaling C) Telemarketing D) Direct marketing
78)
Though vending machines can sell just about anything, they are most often used to sell A) shopping goods. B) convenience goods. C) specialty goods. D) nonprice goods.
79) Mall owners like to have __________ located along the walkways of their malls, because they create a marketplace-type atmosphere. A) banks B) vending machines C) kiosks D) minimarts
80) Companies who send salespeople to customers' homes or places of work are making use of __________ selling. A) direct B) multilevel C) downline D) nonprice
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81) In __________, salespeople are independent contractors who not only sell the product, but also recruit additional salespeople. A) telemarketing B) retail sales C) hierarchical marketing D) multilevel marketing
82) In multilevel marketing, independent contractors who sell a product can increase their own incomes by recruiting __________ to also sell the product. A) kiosks B) manufacturers C) merchant wholesalers D) downliners
83)
In the terminology of multilevel marketing, downliners are
A) the intermediaries who are responsible for handling the shipping of goods down the channel of distribution from the producer to the retailer. B) salespeople who have been recruited by other salespeople known as upliners to market the product. C) able to sell through a telemarketing arrangement, while upliners use direct selling. D) experienced salespeople who are allowed to sell in more than one franchise area by the distributor.
84)
Direct mail, telemarketing, and catalog sales are all common examples of
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A) direct marketing. B) downline selling. C) multilevel marketing. D) direct selling.
85) Any marketing method that directly links manufacturers or intermediaries with the ultimate consumer could be classified as A) direct selling. B) online marketing. C) direct marketing. D) kiosk-based.
86)
The characteristic that all forms of direct marketing have in common is that they
A) are carried out by agents or brokers. B) involve face-to-face or teleconferencing sessions with the customer. C) include some type of activity that directly links manufacturers to the ultimate consumer. D) make use of exclusive distribution systems with a network of traditional "brick and mortar" stores.
87) In the terminology of multilevel marketing, which statement about the relationship between upliners and downliners is most accurate?
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A) In multilevel marketing, upliners are intermediaries who deal directly with final customers, while downliners are intermediaries who coordinate the transportation and storage services the upliners need to move the goods they sell through the channel of distribution. B) In multilevel marketing, upliners are salespeople who act as independent contractors, earning commissions on their own sales and also on the sales of downliners, who are additional salespeople that they recruit. C) In multilevel marketing, upliners sell through electronic retailing arrangements, while downliners use more traditional methods of retail selling. D) In multilevel marketing, upliners use intensive distribution strategies to sell a good, while downliners use either a selective or exclusive distribution strategy to sell the same type of good.
88)
Which statement identifies a key advantage of direct marketing?
A) Direct marketing enables salespeople to close a non-refundable sale in the customer's home or place of work. B) Direct marketing allows firms to expand their markets by selling to both ultimate consumers and other marketing intermediaries. C) Direct marketing is popular with consumers because it is so convenient to shop from home or work. D) Direct marketing creates a strong incentive for salespeople to recruit additional salespeople in order to gain the greatest possible market coverage.
89)
Which assessment of online retailing is most accurate?
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A) Online retailing has two major advantages over traditional businesses: simplicity and very low start-up costs. B) One of the reasons online retailing firms have been so successful has been their ability to deal with customer complaints and provide personalized services more efficiently than traditional firms. C) Traditional retailers seldom find much success when they attempt to incorporate online selling into their businesses. D) The line between online retailing and traditional retailing is blurring as traditional retailers go online.
90)
Which statement about kiosks and carts is the most accurate?
A) Kiosks and carts are popular with mall owners because their sales are exempt from sales taxes. B) Carts and kiosks have lower overhead costs than stores do, so they can offer lower prices. C) Kiosks and carts have struggled in recent years because of their high overhead costs. D) Most mall owners would like to eliminate kiosks and carts from their walkways but are barred by law from doing so.
91) Swim ’n Sun Inc. sells swimsuits and accessories by sending customers a catalog nine times a year. The company has no retail stores or website but offers a toll-free order number that operates 24 hours a day, 365 days a year. Swim ’n Sun Inc. sells using a technique known as A) wholesaling. B) indirect marketing. C) telemarketing. D) multilevel marketing.
92) Which scenario is an example of a consumer making a purchase through a direct marketing arrangement?
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A) Marissa purchased a box of macaroni at a local grocery store with a coupon on the box. B) Brett purchased a laptop at a big-box retailer's special tech department. C) Alecia purchased a set of glasses featured in a department store's lower level. D) Tyrone purchased a map of the galaxy by sending in an order form he received in the mail.
93) In a(n) __________ distribution system all the organizations in the channel of distribution are owned by one firm. A) administered B) contractual C) supply-based D) corporate
94) In a(n) __________ distribution system the producer manages all the marketing functions at the retail level. A) administered B) contractual C) conglomerate D) master limited
95)
Franchise systems are one type of __________ distribution system. A) corporate B) wholesale C) contractual D) administered
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96) McDonald's, Planet Fitness, Baskin-Robbins, and Dunkin Donuts all make use of the __________ form of contractual distribution system. A) wholesale-sponsored B) franchise C) retail cooperative D) intermediary
97) In a(n) __________, independently owned and managed stores sign an agreement to use the same name, participate in chain promotions, and cooperate as a unified system. A) administered distribution system B) corporate distribution system C) wholesaler-sponsored chain D) cash-and-carry chain
98) Taken together, all the organizations that move goods from the sources of raw materials to ultimate consumers are known as a A) multifunction network. B) supply chain. C) wholesale intermediary. D) marketing mix.
99) __________ manages the movement of raw materials, parts, work in progress, finished goods, and related information throughout the supply chain, as well as managing the return of goods when necessary and the recycling of goods when appropriate.
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A) Direct marketing B) Multilevel marketing C) Supply chain management D) Retail distribution
100) A common trait of corporate distribution systems, administered distribution systems, contractual distribution systems, and supply chains is that they all A) are arrangements that seek to distribute goods more efficiently by eliminating most functions performed by marketing intermediaries. B) seek to consolidate and control the distribution system by having one firm own all of the distribution functions. C) attempt to improve the efficiency of distribution systems by linking the firms together in a formal relationship. D) have been replaced by more efficient distribution systems relying heavily on online linkages.
101) One thing that franchise systems, wholesaler-sponsored chains, and retail cooperatives have in common is that they are all A) distribution systems in which producers also act as intermediaries in the distribution process. B) dependent on multilevel marketing strategies. C) forms of distribution systems in which a single firm owns all the organizations involved in distributing the product. D) forms of contractual distribution systems.
102)
In administered distribution systems, retailers typically
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A) are reluctant to cooperate because they must perform many marketing functions for an uncertain payment. B) receive a great deal of marketing help from producers. C) are really subsidiaries of a manufacturer. D) sign a contract agreeing to cooperate with wholesalers in the channel of distribution.
103)
Which statement about wholesaler-sponsored chains is most accurate?
A) All stores are independently owned but cooperate as a unified system of stores. B) All stores act independently except for an agreement to share the costs associated with distribution. C) All stores are owned by a single wholesaler but operate under separate management. D) All stores share profits and losses according to a contractual arrangement.
104) Which activity is most likely to be performed by someone responsible for supply chain management? A) developing an effective advertising campaign for a line of products B) establishing a budget for the firm's next fiscal year C) finding ways to handle the return of goods and recycled materials D) holding focus groups to learn what consumers want in new products
105) Firestone owns its manufacturing sites as well as retail stores that sell its tires. Firestone exemplifies a(n) A) selective distribution system. B) contractual distribution system. C) administered distribution system. D) corporate distribution system.
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106) Lo-Cal Yogurt was unable to get retailers to agree to a contractual arrangement to cooperate in the distribution process, so it took over all the marketing functions for its products at grocery stores. The grocers like this arrangement because Lo-Cal Yogurt provides outstanding marketing support for its products. Lo-Cal Yogurt is using a(n) __________ system to distribute its products. A) corporate distribution B) franchise C) retail cooperative distribution D) administered distribution
107) Talia owns and operates a In the House home supply store. Although her store is independently owned and operated, she has signed an agreement with over seventy stores in the Midwest to use a common name, participate in chain promotions, and cooperate with other stores in the chain. What is Talia’s store a part of? A) administered chain B) wholesaler-sponsored chain C) corporate distribution system D) horizontal distribution chain
108) Parker, an employee at a tractor assembly plant for a U.S. manufacturer, manages a group of employees who measure the quality of parts that arrive on rail cars from Mexico and other countries. As a receiver of tractor parts from other suppliers, Parker works in A) a franchise system. B) supply chain management. C) a corporate distribution system. D) direct mail operations.
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109) Victor works in the marketing department at Brimford Manufacturing. Much of his job involves managing the movement of materials, parts, and information from suppliers to his firm. He tries to coordinate these flows with his firm's factory processes and assists with the efficient movement of finished goods to final consumers. These activities suggest that Victor’s job responsibilities focus on A) merchant wholesaling. B) multilevel marketing. C) utility processing. D) supply chain management.
110) __________ involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit. A) Export management B) Multilevel marketing C) Logistics D) Manufacturing
111) __________ brings raw materials, packaging, other goods and services, and information from suppliers to producers. A) Freight forwarding B) Inbound logistics C) Retailing D) Merchandising
112) __________ deals with moving finished products and information to business buyers and ultimate consumers.
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A) Inbound logistics B) Outbound logistics C) Franchising D) Wholesale distribution
113) When firms manage the return of goods from consumers either because they are defective or for recycling purposes, they are involved in A) retail intermediaries. B) inbound logistics. C) factory processes. D) reverse logistics.
114) __________ is the term used to describe the use of outside firms to help move their goods through the supply chain. A) Third-party logistics B) Multilevel distribution C) External logistics D) Mediated distribution
115)
Currently, in the United States the greatest volume of goods and services is shipped by A) trucks and vans. B) pipelines. C) rail. D) water.
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116) __________ put many small shipments together to create a single large shipment that can be transported more cost-efficiently to the final destination. A) Drop shippers B) Rack jobbers C) Mixed merchandisers D) Freight forwarders
117)
Pipelines are used primarily to transport A) coal slurry. B) hazardous wastes. C) ammonia and acids. D) water, petroleum, and petroleum products.
118) __________ shipping uses several different modes of transportation to complete a single long-distance movement of freight. A) Intermodal B) Multilevel C) Flexmode D) LAST (land-air-sea transport)
119)
The most expensive mode of transportation is A) railroad. B) truck. C) ship. D) air.
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120)
The two basic types of warehouses are A) public and private. B) railside and portside. C) storage and distribution. D) seasonal and long term.
121)
__________ warehouses are used to gather and redistribute products. A) Storage B) Distribution C) Wholesale D) Merchandising
122)
__________ warehouses are used to hold products for a relatively long time. A) Storage B) Public C) Seasonal D) Distribution
123)
Logistics is concerned with
A) with flows of materials, finished products, and information. B) only the flow of information, not the flow of materials and products. C) with the flow of materials to the manufacturer and with the flow of finished products to the consumer, but not with the flow of information. D) only the flow of finished goods from the producer to the final consumer.
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124) The part of logistics that is most concerned with the flow of goods as well as work in process within the manufacturing firm is A) inbound logistics. B) materials handling. C) reverse logistics. D) nonstore retailing.
125)
Compared to rail transportation, one of the advantages of shipping by truck is that trucks A) are more energy efficient. B) can carry a greater volume. C) can reach more destinations. D) are less expensive.
126) is
Compared to railroads and trucks, the biggest advantage offered by air transport is that it
A) faster. B) more dependable. C) lower in cost. D) able to reach more destinations.
127) Items such as snow skis, lawnmowers, and other highly seasonal items are often held in __________ warehouses during the months they are not in demand. A) seasonal B) distribution C) set aside D) storage
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128) Businesses are using __________ and other ways to track goods and control the flow of goods from point of origin to point of consumption. "Tracking" is an important part of the process of managing the flow of goods, an activity that marketers call __________. A) tag team identification (TTI); factory processing B) radio frequency identification (RFID); intermediation C) radio frequency identification (RFID); logistics D) Reverse logistics; materials handling
129)
Which activity would be most closely associated with inbound logistics?
A) Arranging equipment on the factory floor so that materials move smoothly and efficiently from one workstation to the next B) Evaluating various shipping methods to find the most efficient way to transport goods to the final customer C) Establishing a program to encourage customers to return used products to the manufacturer so materials can be recycled D) Working with suppliers to establish a more frequent delivery system that will enable the manufacturing firm to hold smaller inventories of parts and materials
130) Which type of wholesale organization would be most useful to a small manufacturer that has shipments that are too small to fill a truck or railcar? A) rack jobbers B) cash-and-carry wholesalers C) piggy-backers D) freight forwarders
131) According to the box “Adapting to Change,” the Intelligent Retail Lab developed by Walmart allows the company to
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A) easily monitor what items are purchased so they can be quickly replenished. B) gather demographic data about its shoppers. C) ship products directly to consumer’s homes when not available in store. D) reduce employee theft by tracking the location of high-cost merchandise.
132) Tremont Industries has discovered a defect in one of its products that may result in injury to users. The company believes it must quickly develop and implement a recall program. It is likely that Tremont soon will be placing a great deal of emphasis on A) inbound logistics. B) materials handling. C) reverse logistics. D) third-party logistics.
133) Charlotte, a marketing manager, is worried her firm is doing a poor job of managing the movement of finished products to the final consumer. If she is right, the company should work to improve its A) outbound logistics. B) administered support system. C) materials handling. D) coordination of its freight forwarders.
134) Kylie is working to find ways to better her company's movement of materials and goods from the warehouse to the factory floor. Kylie is looking into ways of making her firm's __________ more efficient. A) internal logistics B) outbound logistics C) materials handling D) freight forwarding
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135) Caroline ships chocolate covered strawberries from her farm near Nashville to hotels and restaurants that are often thousands of miles away in cities such as New York, Seattle, and San Franciso. Since the strawberries must reach the hotels and restaurants as quickly as possible, the best mode of transportation for Caroline to use would be A) railroads. B) trucks. C) air. D) ships.
136) Figaro Manufacturing wants to ship a large quantity of its music industry goods across the country. They have contacted On Its Way Shipping Inc., to find out what the shipment would cost. On Its Way has shown Figaro how it can arrange to use a combination of barges, trains, and trucks to complete the shipment at a low cost. On Its Way’s strategy is an example of A) online shipping. B) intermodal shipping. C) franchise distribution. D) multilevel distribution.
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137) "We've got a number of important issues to discuss today," began Dee Stribyute as she opened the weekly marketing manager's meeting for Lite Bite Foods. Lite Bite is a producer of low fat, low calorie snack foods. The other managers attending the meeting were her two top assistants, Mark Etter and Rhea Taylor. "First, sales were hurt last year when we had to recall our almond chocolate bars because of concerns about contaminated ingredients. We've got our work cut out for us to recover from that setback. Many stores quit carrying our products, and even the ones that continued to do so put less emphasis on displaying and promoting them. We've got to get our products into as many stores as possible. Consumers shouldn't have to go all over town trying to find our snacks. We also need to make sure that our products are displayed and promoted in a way that attracts attention." Dee looked at her assistants, and saw that they seemed ready to make some proposals. However, she decided to get another important issue out on the table before stopping to discuss solutions, so she continued with her comments. "The other big concern is the cost of moving our goods. Distribution costs are a major part of the overall cost of selling our goods. What can we do to make the flow of products from our kitchens to our ultimate consumers more efficient?" Having laid out her concerns, Dee sat down at the head of the table, saying to her assistants, "OK guys, I'm ready for suggestions."
138) Organizations that assist in moving goods and services from producers to business and consumer users are called import specialists. ⊚ true ⊚ false
139)
Agents and brokers and wholesalers are types of marketing intermediaries. ⊚ true ⊚ false
140) Wholesalers are marketing intermediaries who sell goods or services to ultimate consumers. ⊚ true ⊚ false
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141) A channel of distribution consists of the marketing intermediaries who join together to transport and store goods in their path from producers to consumers. ⊚ true ⊚ false
142)
Brokers are marketing intermediaries that create the goods they distribute. ⊚ true ⊚ false
143)
Retailers are marketing intermediaries who sell to ultimate consumers. ⊚ true ⊚ false
144) Some manufacturers sell directly to consumers or businesses rather than relying on marketing intermediaries. ⊚ true ⊚ false
145) Agents are marketing intermediaries who have the job of bringing customers and sellers together. ⊚ true ⊚ false
146) Manufacturers are usually able to perform marketing functions, such as transporting, advertising, and storing, faster and more cheaply than marketing intermediaries. ⊚ true ⊚ false
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147) One way marketing intermediaries improve marketing efficiency is by reducing the number of exchange relationships necessary to move goods through the channel of distribution. ⊚ true ⊚ false
148) Some economists have noted that intermediaries add costs to the channel of distribution and need to be eliminated. ⊚ true ⊚ false
149) Marketers claim that intermediaries add value to the channel of distribution that outweighs the cost. ⊚ true ⊚ false
150) The activities performed by most marketing intermediaries are not essential to the marketing process. ⊚ true ⊚ false
151) The best way to reduce the cost of goods is to eliminate marketing intermediaries from the distribution channel. ⊚ true ⊚ false
152) Marketing intermediaries have survived because they have been able to perform marketing functions more efficiently and effectively than a manufacturer or consumer could perform these functions. ⊚ true ⊚ false
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153)
The costs added by marketing intermediaries usually outweigh the value they create. ⊚ true ⊚ false
154) Marketing intermediaries will eventually be eliminated because the activities they provide don’t enhance the marketing process. ⊚ true ⊚ false
155) An effective channel of distribution does more than simply ensure that goods are transported efficiently from producer to buyer. ⊚ true ⊚ false
156) Marketing intermediaries must charge a price for the functions they perform. Thus, a surefire way to reduce distribution costs is to eliminate marketing intermediaries from the channel of distribution. ⊚ true ⊚ false
157) buy.
Marketing costs make up less than 25 percent of the total cost of the goods consumers ⊚ ⊚
true false
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158) Selena Richardson, a real estate agent, brings together the buyers and sellers of houses as well as commercial property. Selena helps the parties negotiate the terms and conditions of real estate sales, but she does not take title to the property, provide credit, or assume any risks associated with the exchanges she helps negotiate. Because Selena provides only limited services, she is not a true marketing intermediary. ⊚ true ⊚ false
159) It’s All Here Supply sells a wide range of garden and landscaping materials within a suburb of a large city. The store frequently advertises that its prices are much lower than the prices charged by larger home improvement chains in the area. This low-price approach means that It’s All Here Supply is a classic example of a wholesaler. ⊚ true ⊚ false
160) Although Deal First brings together buyers and sellers and helps negotiate exchanges, it does not actually take title to any of the goods being traded. Deal First would be classified as an agent or broker. ⊚ true ⊚ false
161) Currently, Flow Plumbing sells directly to thousands of industrial customers. Flow could reduce the number of exchange relationships by including wholesalers in its channel of distribution. ⊚ true ⊚ false
162) Clean and Dry Inc. produces a variety of reasonably priced clothing and dish washing appliances. To cut costs, the company has decided to eliminate all of the marketing intermediaries who help distribute its products. Clean and Dry will be able to reduce its total marketing costs by eliminating the marketing functions these intermediaries perform.
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⊚ ⊚
true false
163) To marketers, the term utility refers to the value added to goods or services by organizations when they make the product more useful or accessible to consumers. ⊚ true ⊚ false
164) Marketers provide a total of four types of utility: primary, secondary, process, and promotion. ⊚ true ⊚ false
165) Producers normally provide form utility, but retailers sometimes also provide this type of utility. ⊚ true ⊚ false
166) Marketing intermediaries concentrate on providing mainly form, time, and place utility, while producers focus on the provision of possession, information, and service utility. ⊚ true ⊚ false
167) Delivery, installation, and follow-up services are the most common ways that marketing intermediaries provide information utility. ⊚ true ⊚ false
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168) One way that marketers can provide utility is by making sure the good is available at a location that is convenient for consumers. ⊚ true ⊚ false
169)
A company website can be an important provider of information utility. ⊚ true ⊚ false
170)
Possession utility has become the most important utility provided by retailers. ⊚ true ⊚ false
171) One way traditional retailers can compete with direct marketing is by providing outstanding service utility. ⊚ true ⊚ false
172) Doing whatever is necessary to transfer ownership of a good from the seller to the buyer is a function of information utility. ⊚ true ⊚ false
173)
A 24-hour quick mart is focused on providing time utility. ⊚ true ⊚ false
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174) In today's competitive market environment, traditional retailers will need to put more emphasis on providing form and place utility, and less emphasis on service utility. ⊚ true ⊚ false
175) According to the box “Spotlight on Small Business,” even the health industry has become more focused on providing time and place utility to its customers. ⊚ true ⊚ false
176) Matthew is an eyewear salesperson for a major retail chain. When he makes recommendations to customers to help them select the product that will best meet their needs, Matthew is providing information utility. ⊚ true ⊚ false
177) Omar was driving on Interstate 80 in eastern Iowa when he noticed the low tire pressure indicator light came on. Omar was relieved when he found a gas station open at the next exit just 2 miles ahead. This is an example of how place utility provides value to a consumer. ⊚ true ⊚ false
178)
Some marketing intermediaries make both wholesale and retail sales. ⊚ true ⊚ false
179)
A retail sale is a sale to a consumer of products for his or her own use. ⊚ true ⊚ false
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180)
The sale of goods to a business purchasing the items for resale is a wholesale transaction. ⊚ true ⊚ false
181)
A firm that makes wholesale sales cannot also legally make retail sales. ⊚ true ⊚ false
182)
Merchant wholesalers do not take title to the goods they handle. ⊚ true ⊚ false
183)
About 80 percent of all wholesalers are classified as merchant wholesalers. ⊚ true ⊚ false
184) The two main types of merchant wholesalers are storage wholesalers and distribution wholesalers. ⊚ true ⊚ false
185)
Limited-function wholesalers are a type of merchant wholesaler. ⊚ true ⊚ false
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186) Cash-and-carry wholesalers and drop shippers are both classified as limited-function wholesalers. ⊚ true ⊚ false
187) Rack jobbers furnish racks or shelves full of merchandise to retailers and keep title to these goods until they are sold. ⊚ true ⊚ false
188) Rack jobbers sell goods on consignment, splitting the profits from their sales with a retailer. ⊚ true ⊚ false
189) Although drop shippers own merchandise they have shipped to buyers, they do not actually handle, stock, or deliver this merchandise themselves. ⊚ true ⊚ false
190) Drop shippers are wholesalers that stock heavy or bulky items and transport them to retail stores. ⊚ true ⊚ false
191)
Drop shippers tend to handle personal care items such as toothpaste and shampoo. ⊚ true ⊚ false
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192) Cash-and-carry wholesalers are limited-function wholesalers that serve mostly smaller retailers with a limited assortment of products. ⊚ true ⊚ false
193) The main difference between agents and brokers is that agents perform a wide array of marketing functions while brokers only negotiate exchanges between buyers and sellers. ⊚ true ⊚ false
194) As long as they do not represent competing products, manufacturer's agents can represent more than one manufacturer in a given sales territory. ⊚ true ⊚ false
195) A key distinction between agents and brokers is that brokers tend to maintain long-term relationships with the people they represent whereas agents are hired on a temporary basis. ⊚ true ⊚ false
196)
A sales agent represents the interests of multiple producers in a smaller territory. ⊚ true ⊚ false
197)
A full-service wholesaler will provide suppliers with market information. ⊚ true ⊚ false
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198)
Wholesalers make business-to-consumer sales. ⊚ true ⊚ false
199)
A hair stylist that you visit every six weeks is an example of a broker. ⊚ true ⊚ false
200) Lucy and Trent solicit orders for plastic pipes from area wholesalers and retailers specializing in plumbing supplies and arrange to have the orders shipped directly from nearby producers. Lucy and Trent operate as drop shippers. ⊚ true ⊚ false
201) Michael supplies shelves of gum and mints to supermarkets and drug stores. He keeps title to the goods until they are sold and then splits the profits with the retailer. Michael is a drop shipper. ⊚ true ⊚ false
202) Jenna owns and operates a home business. Once a month she heads to DeskSpot to buy office supplies for her business. The prices at the DeskSpot are very low, but it does not offer credit or delivery services. DeskSpot is a cash-and-carry wholesaler. ⊚ true ⊚ false
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203) Millie helps dairy farmers negotiate sales to milk processing companies. However, once she has helped negotiate the transaction, she does not maintain a long-term relationship with the farmers. Millie is an example of a sales agent in this market. ⊚ true ⊚ false
204)
Retail organizations employ more than 40 million people. ⊚ true ⊚ false
205) Discount stores, department stores, supermarkets, and specialty stores are all among the major types of retail stores. ⊚ true ⊚ false
206)
Department stores offer a wide variety of products that are sold in separate departments. ⊚ true ⊚ false
207) Warehouse clubs compete by providing enhanced service to customers and seldom try to compete on price. ⊚ true ⊚ false
208)
Discount stores compete in the retail market mainly on the basis of price. ⊚ true ⊚ false
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209) A category killer is an extremely successful product that kills the sales of other products in its category in a retail store. ⊚ true ⊚ false
210) Specialty stores promote a wide variety of products in one product category as their key competitive tool. ⊚ true ⊚ false
211) Category killer stores tend to compete by providing superior service and offering low prices. ⊚ true ⊚ false
212)
Warehouse clubs are usually larger than supermarkets. ⊚ true ⊚ false
213) Discount stores and department stores sell different brands of products that are usually priced about the same. ⊚ true ⊚ false
214)
Exclusive distribution is the use of only one retail outlet in a given geographic area. ⊚ true ⊚ false
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215) Shampoo, deodorant, and popular magazines are usually distributed using a selective distribution strategy. ⊚ true ⊚ false
216) A distribution strategy that puts the product into as many retail outlets as possible is known as an intensive distributive strategy. ⊚ true ⊚ false
217) Producers of shopping goods such as microwaves, sweatshirts, and couches usually rely on an exclusive distribution strategy. ⊚ true ⊚ false
218) An advantage of a selective distribution strategy is that consumers are able to find a popular product at a wide variety of retailers. ⊚ true ⊚ false
219) Retailers that participate in an exclusive distribution strategy will have a strong incentive to carry a large inventory of the good and provide exceptional service to customers. ⊚ true ⊚ false
220)
In order to succeed in today's market, all retailers must compete with low prices. ⊚ true ⊚ false
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221) The main difference between selective distribution and exclusive distribution is the number and type of market segments the firm chooses. In a selective strategy, a variety of profitable niche markets are selected, while in an exclusive strategy one specific market segment is targeted, and all others are excluded. ⊚ true ⊚ false
222) Page Turners is a nationwide chain of stores that offers such a huge selection of books at such competitive prices that small, local bookstores struggle to compete with them. Page Turners is best classified as a discount store. ⊚ true ⊚ false
223) Just a Nickel is a new chain of discount stores. A major part of Just a Nickel’s competitive strategy is likely to be based on keeping its prices lower than those of other types of retailers. ⊚ true ⊚ false
224) Camel Boots is a manufacturer of high-quality hiking boots. The company sells its products through a few preferred retailers in any geographic area. Camel Boots uses a selective distribution strategy. ⊚ true ⊚ false
225) The Sun Daily, a newspaper serving a city with a population of just over 150,000, is placed in vending machines throughout the city and surrounding suburbs. The Sun Daily is also sold at most of the local supermarkets, convenience stores, bookstores, and pharmacies. The Sun Daily newspaper uses an intensive distribution strategy.
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⊚ ⊚
true false
226) The Midtown Mall has many types of shops, including four different athletic goods stores; however, only one of these stores carries the very expensive Dive Time brand of watch that appeals to customers looking for watches that can be used while scuba diving. Dive Time is practicing exclusive distribution by placing its brand in only one store in a given area. ⊚ true ⊚ false
227) Firms that rely on online retailing are almost guaranteed success because they give companies easy access to literally millions of consumers all over the world. ⊚ true ⊚ false
228)
Online retailing is selling goods and services to ultimate consumers online. ⊚ true ⊚ false
229) Some online retailers are working to improve customer service by providing real-time online assistance from a real person. ⊚ true ⊚ false
230) A large number of traditional retailers have developed online stores, giving customers a choice of shopping techniques. ⊚ true ⊚ false
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231) Traditional retailers that have begun using online stores to supplement their physical stores are finding that the Internet not only provides a new way to sell goods, but it also requires a new system to distribute goods. ⊚ true ⊚ false
232)
Social commerce is a form of electronic commerce that involves social media. ⊚ true ⊚ false
233)
Telemarketing is the in-person sale of goods and services. ⊚ true ⊚ false
234) Vending machines are used primarily to sell goods to consumers who have little interest in convenience. ⊚ true ⊚ false
235)
Mall owners tend to like kiosks because they create a marketplace atmosphere. ⊚ true ⊚ false
236)
One drawback of kiosks is that their high overhead costs result in low profit margins. ⊚ true ⊚ false
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237) Direct selling is a distribution strategy that relies on the extensive use of websites and phone sales. ⊚ true ⊚ false
238) Because so many people work outside the home and aren't at home during the day, companies that use direct selling are sponsoring parties at workplaces to sell their products. ⊚ true ⊚ false
239) In multilevel marketing, salespeople not only sell the product, they also recruit other people to sell the product. ⊚ true ⊚ false
240) In multilevel marketing, upliners recruit downliners and receive a commission on the sales their downliners make. ⊚ true ⊚ false
241) Although there have been some unethical firms involved in multilevel marketing, this form of retailing remains quite successful for some. ⊚ true ⊚ false
242) Direct marketing involves having a salesperson visit the customer's home or place of business.
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⊚ ⊚
true false
243) A major advantage of direct marketing is that it is a very convenient way for consumers to shop. ⊚ true ⊚ false
244)
Telemarketing, catalog sales, and online shopping are all examples of direct marketing. ⊚ true ⊚ false
245) In the battle between online and traditional brick-and-mortar retailers, the online retailers seem to have all the advantages needed to emerge as the clear winners. ⊚ true ⊚ false
246) Many firms that want to use an intensive distribution strategy would find vending machines an attractive method of selling their goods. ⊚ true ⊚ false
247) Direct selling has all but disappeared as a major form of nonstore retailing because the trend toward two-income households means fewer opportunities for selling in the home. ⊚ true ⊚ false
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248) In multilevel marketing, salespeople have little incentive to recruit new salespeople, because the new salespeople may compete against them and reduce their income. ⊚ true ⊚ false
249) One reason that direct marketing has become so popular is because many people enjoy developing a personal relationship with a salesperson that comes directly to their home or place or work. ⊚ true ⊚ false
250) Townline Tennis, a high-quality racquet and tennis gear company, makes sales by sending catalogs to customers and offering them a toll-free telephone number so that they can call in their orders 24 hours a day, any day of the year. Townline Tennis uses telemarketing. ⊚ true ⊚ false
251) Alonzo is a salesperson for Arch Home Cleaning Products Inc. His job requires him to sell products, but he is also expected to recruit more salespeople for the company. He will earn a commission on all of the sales earned by the salespeople he recruits. Arch Home Cleaning is using a retail distribution strategy known as multilevel marketing. ⊚ true ⊚ false
252) Traditional retailers can stay competitive with online retailers by being part of a unified system of distribution. ⊚ true ⊚ false
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253) There are four specific types of channel systems available to companies that tie firms together in a unified way. ⊚ true ⊚ false
254)
In a corporate distribution system, one firm owns all the organizations in the distribution. ⊚ true ⊚ false
255) Corporate distribution systems consist of several independently owned intermediaries, all of them organized as multinational corporations. ⊚ true ⊚ false
256) An advantage of a corporate distribution system is that the manufacturer operates their own retail stores, sets prices, creates displays, and controls inventory. ⊚ true ⊚ false
257) Franchise systems, wholesaler-sponsored chains, and retail cooperatives are all forms of contractual distribution systems. ⊚ true ⊚ false
258) One disadvantage of a franchise system of distribution is that quality and service tend to be widely inconsistent. ⊚ true ⊚ false
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259)
Retail cooperatives are typically initiated by the wholesaler. ⊚ true ⊚ false
260) Stores that are part of a wholesaler-sponsored chain don’t have to use the same store name. ⊚ true ⊚ false
261) In an administered distribution system, retail stores manage all the marketing functions at the retail level. ⊚ true ⊚ false
262) The entire collection of organizations that move goods and services from the source of raw materials to the final consumer is referred to as the supply chain. ⊚ true ⊚ false
263) Because supply chains are so complex, firms have found it difficult to outsource supply chain management. ⊚ true ⊚ false
264) The process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all of the organizations involved in the supply chain in a timely manner is called intermediary management.
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⊚ ⊚
true false
265) Supply chain management manages the movement of relevant information as well as the movement of parts and finished goods through all organizations involved in the supply chain. ⊚ true ⊚ false
266) Supply chain management not only deals with the movement of materials, parts, and finished goods, it also manages the return of goods and recycling of materials when appropriate. ⊚ true ⊚ false
267) While sustainability issues affect the wholesale aspect of the supply chain, they have little effect on the retail side. ⊚ true ⊚ false
268) Baseball Kids Inc. manufactures equipment designed to develop the baseball skills of children. In order to control all of the marketing operations, Baseball Kids owns all of the organizations in the channel of distribution for its products, including the chain of Baseball Kids retail stores. The approach taken by Baseball Kids is known as an administered distribution system. ⊚ true ⊚ false
269) Though Gritt’s Hardware stores are independently owned, operated, and managed, they have signed an agreement to participate in chain promotions, use the same name, and cooperate as a unified system of stores. The Gritt’s Hardware stores are using a distribution system known as a wholesaler-sponsored chain.
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⊚ ⊚
true false
270) A shoe and leather goods repair company, Hole Sole, has been approached by Rainy Day Umbrellas, a producer of fashionable umbrellas and totes. Rainy Day wants to sell its products in the Hole Sole stores under an administered distribution system. If Hole Sole accepts Rainy Day’s proposal, it will perform many marketing services for the umbrella maker in exchange for a flat fee. ⊚ true ⊚ false
271) Jensen Marine obtains materials from several suppliers and uses these materials to produce its goods. It relies on several marketing intermediaries to help it distribute the boating equipment it makes. Together, Jensen, its suppliers, and the marketing intermediaries are all part of a supply chain. ⊚ true ⊚ false
272) As she works in the marketing department of a major manufacturing firm, Katie spends most of her time trying to coordinate the movement of materials, parts, finished goods, and information through all of the organizations involved in the distribution process. These activities suggest that Katie’s job responsibilities focus on supply chain management. ⊚ true ⊚ false
273) Logistics involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption. ⊚ true ⊚ false
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274)
The physical distribution of goods has become less complex over time. ⊚ true ⊚ false
275) Materials handling is that part of logistics that deals with moving goods within the warehouse, from the warehouse to the production floor, and to various work stations along the production process. ⊚ true ⊚ false
276) Inbound logistics is concerned with the flow of finished products from the manufacturer to the final consumer. ⊚ true ⊚ false
277)
Manufacturers use reverse logistics when importing parts to produce a good. ⊚ true ⊚ false
278) Third-party logistics is the term used to describe the use of outside firms to help move goods from here to there. ⊚ true ⊚ false
279)
Logistics is concerned with the flow of information as well as with the flow of goods. ⊚ true ⊚ false
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280) The basic transportation service criteria are speed, cost, dependability, flexibility, frequency, and reach. ⊚ true ⊚ false
281)
In the United States, the largest percentage of goods (by volume) is shipped by truck. ⊚ true ⊚ false
282)
Air transportation is the least expensive way to send goods overseas. ⊚ true ⊚ false
283) Water transportation is the obvious choice when shipping goods that must be delivered quickly. ⊚ true ⊚ false
284)
Water transportation has benefits and drawbacks; for example, it is inexpensive but slow. ⊚ true ⊚ false
285) An advantage of shipping by truck is that trucks can deliver small shipments to remote locations. ⊚ true ⊚ false
286)
Pipelines are used primarily to transport water, petroleum, and petroleum products.
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⊚ ⊚
true false
287)
Pipelines move liquid products very efficiently and can even move products like coal. ⊚ true ⊚ false
288)
Railroads are an energy-efficient mode of transporting many types of goods. ⊚ true ⊚ false
289) Although air transport currently accounts for only a small percentage of all shipments, it has become a critical mode in many industries. ⊚ true ⊚ false
290)
The air freight industry is starting to focus on global distribution. ⊚ true ⊚ false
291) The use of multiple modes of transportation to complete a single long-distance movement of freight is known as multicarrier shipping. ⊚ true ⊚ false
292) Services that specialize in intermodal shipping are known as intermodal marketing companies.
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⊚ ⊚
true false
293) Fishyback refers to when truck trailers are loaded into a railroad flat car for delivery to the final destination. ⊚ true ⊚ false
294)
Some freight forwarders offer warehousing and customs assistance. ⊚ true ⊚ false
295)
There are three major types of warehouses: centralized, dispersed, and mobile. ⊚ true ⊚ false
296)
A distribution warehouse stores products for relatively long periods of time. ⊚ true ⊚ false
297)
Seasonal goods, such as snowblowers, are typically kept in storage warehouses. ⊚ true ⊚ false
298) Suppliers to large retailers like Target and Walmart may soon be required to use RFID tags when shipping products to these companies.
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⊚ ⊚
299)
true false
An increase in fuel prices could encourage shippers to rely more on rail transportation. ⊚ true ⊚ false
300) Freight forwarders are particularly useful to large firms who must ship very large quantities on short notice. ⊚ true ⊚ false
301) The use of pipelines should decline in the future because this mode is suitable only for shipping grain products. ⊚ true ⊚ false
302) The main difference between storage warehouses and distribution warehouses is that storage warehouses are relatively small, specialized facilities used to store one particular type of good for short periods while distribution warehouses are large facilities used to store a wide variety of goods for longer periods of time. ⊚ true ⊚ false
303) Morrison Metal Works had to shut down its manufacturing plant for several hours twice in the past week. Some of its key suppliers have been late with their shipments of materials and parts. These difficulties indicate that Morrison has done a poor job in managing its inbound logistics. ⊚ true ⊚ false
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304) Garrett, a distribution specialist, has been looking for ways to improve the flow of parts and materials from his company's warehouses to the production line, and the movement of work in process throughout the company's factories. These efforts suggest that Garrett’s primary interest is in improving his company's inbound logistics. ⊚ true ⊚ false
305) Specializing in logistics, Gretchen, a marketing manager, is likely to focus mainly on managing the flow of goods and leave issues about how to manage the flow of information to managers in other areas of marketing. ⊚ true ⊚ false
306) Schilling Manufacturing reached an agreement with an intermodal marketing company to significantly reduce the cost of shipping its finished goods to some major business customers. This agreement will help Schilling reduce the costs associated with outbound logistics. ⊚ true ⊚ false
307) Cotton Top is a small manufacturer of infant clothing. Rarely are Cotton Top’s shipments large enough to be transported cost-efficiently by filling an entire truck or railcar. The company could benefit by relying on a freight forwarder to help it distribute its goods. ⊚ true ⊚ false
308) Martin Manufacturing wants to ship a large quantity of its goods across the country. They have contacted So Fast Inc., to find out what the shipment would cost. So Fast has shown Martin how a combination of barges, trains, and trucks could be used to complete the shipment at low cost. So Fast’s strategy is an example of intermodal shipping.
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⊚ ⊚
true false
309) OutFast is a new delivery company that wants to compete against FedEx and UPS in the United States, Canada, and Mexico. One of the keys to OutFast’s success will be the ability to establish large storage warehouses at a few key locations throughout North America. ⊚ true ⊚ false
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Answer Key Test name: chapter 15 7) C 8) A 9) A 10) D 11) A 12) B 13) A 14) C 15) D 16) C 17) C 18) C 19) B 20) C 21) C 22) C 23) B 24) C 25) A 26) D 27) B 28) C 29) D 30) A 31) A 32) C
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33) C 34) C 35) A 36) B 37) D 38) A 39) C 40) C 41) A 42) B 43) B 44) A 45) D 46) A 47) B 48) C 49) D 50) C 51) A 52) B 53) C 54) A 55) D 56) A 57) B 58) C 59) C 60) A 61) D 62) B
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63) D 64) B 65) C 66) A 67) D 68) B 69) A 70) B 71) C 72) D 73) C 74) B 75) D 76) A 77) C 78) B 79) C 80) A 81) D 82) D 83) B 84) A 85) C 86) C 87) B 88) C 89) D 90) B 91) C 92) D
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93) D 94) A 95) C 96) B 97) C 98) B 99) C 100) C 101) D 102) B 103) A 104) C 105) D 106) D 107) B 108) B 109) D 110) C 111) B 112) B 113) D 114) A 115) C 116) D 117) D 118) A 119) D 120) C 121) B 122) A
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123) A 124) B 125) C 126) A 127) D 128) C 129) D 130) D 131) A 132) C 133) A 134) C 135) C 136) B 137) Section Break 138) FALSE 139) TRUE 140) FALSE 141) TRUE 142) FALSE 143) TRUE 144) TRUE 145) TRUE 146) FALSE 147) TRUE 148) TRUE 149) TRUE 150) FALSE 151) FALSE 152) TRUE
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153) FALSE 154) FALSE 155) TRUE 156) FALSE 157) FALSE 158) FALSE 159) FALSE 160) TRUE 161) TRUE 162) FALSE 163) TRUE 164) FALSE 165) TRUE 166) FALSE 167) FALSE 168) TRUE 169) TRUE 170) FALSE 171) TRUE 172) FALSE 173) TRUE 174) FALSE 175) TRUE 176) TRUE 177) TRUE 178) TRUE 179) TRUE 180) TRUE 181) FALSE 182) FALSE
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183) TRUE 184) FALSE 185) TRUE 186) TRUE 187) TRUE 188) TRUE 189) TRUE 190) FALSE 191) FALSE 192) TRUE 193) FALSE 194) TRUE 195) FALSE 196) FALSE 197) TRUE 198) FALSE 199) FALSE 200) TRUE 201) FALSE 202) TRUE 203) FALSE 204) TRUE 205) TRUE 206) TRUE 207) FALSE 208) TRUE 209) FALSE 210) TRUE 211) FALSE 212) TRUE
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213) FALSE 214) TRUE 215) FALSE 216) TRUE 217) FALSE 218) FALSE 219) TRUE 220) FALSE 221) FALSE 222) FALSE 223) TRUE 224) TRUE 225) TRUE 226) TRUE 227) FALSE 228) TRUE 229) TRUE 230) TRUE 231) TRUE 232) TRUE 233) FALSE 234) FALSE 235) TRUE 236) FALSE 237) FALSE 238) TRUE 239) TRUE 240) TRUE 241) TRUE 242) FALSE
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243) TRUE 244) TRUE 245) FALSE 246) TRUE 247) FALSE 248) FALSE 249) FALSE 250) TRUE 251) TRUE 252) TRUE 253) TRUE 254) TRUE 255) FALSE 256) TRUE 257) TRUE 258) FALSE 259) FALSE 260) FALSE 261) FALSE 262) TRUE 263) FALSE 264) FALSE 265) TRUE 266) TRUE 267) FALSE 268) FALSE 269) TRUE 270) FALSE 271) TRUE 272) TRUE
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273) TRUE 274) FALSE 275) TRUE 276) FALSE 277) FALSE 278) TRUE 279) TRUE 280) TRUE 281) FALSE 282) FALSE 283) FALSE 284) TRUE 285) TRUE 286) TRUE 287) TRUE 288) TRUE 289) TRUE 290) TRUE 291) FALSE 292) TRUE 293) FALSE 294) TRUE 295) FALSE 296) FALSE 297) TRUE 298) TRUE 299) TRUE 300) FALSE 301) FALSE 302) FALSE
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303) TRUE 304) FALSE 305) FALSE 306) TRUE 307) TRUE 308) TRUE 309) FALSE Student name:__________ 1) Identify the advantages and disadvantages of newspapers and television as media to carry your firm's promotional message. Which of the two receives the most advertising revenues and what are key advantages and disadvantages of both?
2) Explain how publicity differs from advertising. What are the advantages and disadvantages of publicity in a firm's promotion strategy?
3) Explain the steps in the personal selling process. How does B2B personal selling differ from B2C personal selling?
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4) Your company has developed a new nutritious snack and you are part of the team created to develop the promotion mix for the new product. Your specific task on this team is to determine the sales promotion activities of the promotion mix. Identify and describe several possible sales promotion activities the firm could use to promote the new snack food.
5) You are assigned the responsibility to prepare a promotional campaign for a new allergy relief drug produced by the PharmaOne Pharmaceutical Company. Outline the highlights of applying both (a) a pull strategy and (b) a push strategy.
6)
Explain the difference between viral marketing, social networking, and podcasting.
7) The goal of __________ is to inform and remind people in a target market about specific products, eventually persuading them to participate in an exchange.
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A) promotion B) market research C) market segmentation D) production
8) The combination of advertising, personal selling, public relations, and sales promotion activities traditionally used by an organization represents its A) marketing communications system. B) focus group. C) supply chain. D) promotion mix.
9) __________ combines all the promotional tools employed by a firm into one comprehensive and unified promotional strategy. A) A supply chain B) Integrated marketing communication C) A push promotional program D) Branding
10)
A promotional campaign begins by A) identifying a target market. B) defining the objectives for each element of the promotion mix. C) determining a promotional budget. D) developing a unifying message.
11)
The traditional promotion mix for a firm consists of the
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A) strategic mix of price, product, place, and advertising. B) various types of advertising media the firm selects to reach each specific target market. C) marketing intermediaries employed by the firm to create a supply value chain. D) advertising, personal selling, public relations, and sales promotion used to reach a target market.
12) Creating a positive brand image by using all the promotional tools in a comprehensive, unified promotional strategy is achieved through A) brand awareness. B) the marketing mix. C) demographic analysis. D) integrated marketing communication.
13) New Day Vitamin Company's __________ relies heavily on advertising, personal selling, and a limited use of product sampling. A) marketing mix B) promotion mix C) communication network D) transfer marketing
14) Gemini Manufacturing has recently revamped its promotional strategy. Gemini now utilizes a system that combines all the elements of their promotion mix to create a more responsive organization providing a consistent message. Gemini Manufacturing has adopted a(n) A) internal marketing program. B) integrated marketing communication system. C) personal selling plan. D) corporate distribution system.
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15) The management at Avenue Apparel Inc. designed a strategy that unifies advertising, personal selling, public relations, and sales promotion activities creating a consistent message. This effort to promote a positive brand image represents a(n) __________ program. A) global marketing B) interactive promotion C) integrated marketing communication D) supply chain
16) __________ refers to any paid, nonpersonal communication through various media by organizations and individuals who are in some way identified in the message. A) Publicity B) Promotion C) Public relations D) Advertising
17)
The total annual expenditures on advertising in the United States A) peaked last year at approximately $700 billion. B) has declined significantly as firms utilize low cost online promotional opportunities. C) is expected to be almost $390 billion for 2020. D) has been capped at $300 billion by recent government regulations.
18) Manufacturers’ advertising directed to wholesalers and retailers to encourage them to carry their products is called
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A) retail advertising. B) trade advertising. C) business-to-business advertising. D) institutional advertising.
19) When an organization uses advertising to create an attractive image for itself, this type of advertising is called A) retail advertising. B) trade advertising. C) comparison advertising. D) institutional advertising.
20) __________ advertising encourages wholesalers and retailers to carry the products of a specific manufacturer. A) Advocacy B) Retail C) Trade D) Institutional
21)
__________ advertising supports a particular view or position on an issue. A) Advocacy B) Institutional C) Comparison D) Trade
22)
In terms of total advertising dollars spent, the number one medium is
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A) television. B) digital. C) newspapers. D) radio.
23)
Local advertisers benefit the most from A) magazine ads. B) national television ads. C) outdoor ads. D) newspaper ads.
24) In evaluating the best advertising medium to reach a specific target market the clear choice is A) cable television. B) newspapers. C) network television. D) direct mail.
25)
The effectiveness of direct mail advertising suffers from A) its inflexibility. B) the limited length of the message. C) the consumer perception that it is junk mail. D) its inability to target specific markets.
26)
The effectiveness of magazine advertising is reduced by its
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A) inflexible schedules. B) inability to target specific markets. C) brief shelf life. D) higher total cost, relative to television advertising.
27)
What is a major strength of direct mail advertising? A) ability to go “viral” B) widespread acceptance by consumers C) subject to few restrictions or regulations D) ability to accurately target specific markets
28) Which term refers to the practice of paying to have a product appear favorably in a television show or movie? A) interactive promotion B) product placement C) brand association D) market recognition
29)
Infomercials provide the opportunity for A) the product to sell itself. B) product placement to occur. C) the use of outdoor advertising. D) narrowing the supply chain.
30)
Television programs devoted exclusively to promoting goods and services are called
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A) testimonials. B) infomercials. C) interactive television. D) online advertising.
31) __________ changes the relationship between buyers and sellers from a monologue to a dialogue in which information is shared to create mutually beneficial exchanges. A) Advertising B) A push strategy C) Interactive promotion D) Public relations
32)
Advertisers like online advertising because A) they are able to see how many people have viewed their advertisement. B) they do not need to customize the ads for a particular target group. C) it is impossible to ignore or avoid. D) it is free.
33) Which form of advertising offers the greatest potential for meaningful interaction between buyers and sellers? A) radio B) infomercials C) product placement D) online advertising
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34) Companies can implement global marketing by developing a product and promotional strategy that A) is tailored to each individual market. B) can be implemented worldwide. C) requires low-cost production through outsourcing. D) motivates intermediaries (i.e. wholesalers and retailers) to actively stock and sell the firm's goods and services.
35) Which form of advertising makes it possible for advertisers to easily test ads before bringing them to other forms of media? A) global B) social media C) infomercial D) product placement
36)
Future promotional efforts will likely be A) custom-designed to reach smaller audiences. B) targeted at larger audiences. C) less interactive and more persuasive. D) similar to promotional efforts today.
37)
What is an advantage of magazine advertising? A) short exposure time B) ability to quickly change message C) can target specific audience D) relatively short life
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38)
Which media enables firms to quickly change their advertising message? A) directories B) magazines C) newspapers D) television
39)
What represents the primary purpose of a firm using institutional advertising? A) creates a positive image for the firm B) full coverage of local markets C) high visibility of a specifically targeted message D) reduces cost
40) Firms with a very limited advertising budget would be very unlikely to use __________ advertising. A) Internet B) radio C) outdoor D) television
41) According to the box “Adapting to Change,” advertisers are rethinking some traditional television ad strategies. What additional benefit is provided to advertisers by streaming services such as Roku, Hulu, and Sling? A) very low cost B) expanded audience data C) free product placement D) interactivity
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42)
Which characteristic helps explain the popularity of infomercials? A) interactive nature of the presentation B) ability to clearly demonstrate the product's benefits C) use of an inexperienced salesperson who is believable D) impact of favorable government testimonials on potential buyers
43)
Which statement is the most accurate assessment of promotion?
A) Studies indicate that effective promotion focuses on the pricing elements of the marketing mix. B) The Internet changes the focus of promotion from "working with" to "promoting to" customers. C) New promotional efforts create a more interactive approach, developing a dialogue between the firm and its customers. D) Successful promotion utilizes each element of the promotion mix independently, creating a well-diversified message.
44) In the past, __________ was an important advertising strategy used in movies. Now it is also used with video games. It can be easily altered to reflect another advertiser, depending upon which advertiser has purchased ad time. A) product placement B) direct mail C) sampling D) a commercial
45) One of the distinct differences between __________ and other forms of advertising is the fact that the medium used allows for a dialogue exchange of information between buyers and sellers, instead of a monologue-type approach.
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A) product placement B) direct mail C) interactive promotion D) infomercials
46)
Which statement is the most accurate depiction of advertising?
A) Advertising helps pay for production costs of newspapers and magazines. B) Word of mouth is the most effective form of advertising. C) Advertising does not really provide information to consumers; it merely persuades consumers to buy advertised products. D) Consumers don't remember good advertisements.
47)
Evidence indicates that the best promotional strategy for firms operating globally is A) a "one-mix-fits-all" strategy. B) to uniquely design a strategy for each country. C) based on total operating costs and the nation's disposable income. D) designed by foreign intermediaries who control promotion.
48)
Interactive promotion is used to A) create a dialogue between buyers and sellers. B) transform the approach from "working with" to "promoting to" customers. C) combine multiple advertising approaches into one larger media. D) adjust global messages for each cultural audience.
49) When marketing to consumers in the global population, it's important for companies to remember that promoting products
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A) is easy and profitable if they are well-known brands. B) can be accomplished using a global approach since consumers are more alike than most people think. C) is best done by using personal selling and product sampling. D) calls for attention to cultural differences and possible translation problems.
50) The box “More Than Milk’s Favorite Cookie” addresses the role __________ plays in global advertising efforts. A) culture B) distribution C) price D) quality control
51) Baker Investing wants to build strong relationships with its customers and is looking to create a more interactive approach to advertising. Which advertising medium should the company use to achieve their goal? A) online B) radio C) television D) newspapers
52) Saws and More promotes its services through Northwest Woods Today, a trade magazine that charges Saws and More and other companies $5,000 per page for __________ to help offset the magazine's publishing costs. A) publicity B) advertising C) public relations D) trade shows
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53)
Ark Electronics plans to pursue a global advertising strategy. This means that
A) it must avoid advertising in foreign markets and rely instead on other elements of its promotion mix, such as personal selling and public relations. B) it will use television for promoting its products in every country. C) it will develop a single promotional strategy that can be implemented worldwide. D) it must charge the same price in every market.
54) Roadway Motorcycle is looking to change up its promotional strategy and focus on its relationships with customers. What is required for Roadway to build meaningful relationships with its customers? A) giving consumers access to limited information B) tracking customer purchases C) promoting to rather than working with customers D) offering full-service purchases over their cell phones
55) __________ refers to the face-to-face presentation and promotion of goods and services. This also includes searching for prospects and providing follow-up services. A) Word-of-mouth promotion B) Personal selling C) Public relations D) Internal marketing
56) People with an unmet need, the authority to buy, and the willingness to listen to a sales message represent a firm's
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A) prospects. B) intermediaries. C) suppliers. D) cohorts.
57)
In the seven-step B2B selling process, the selection of potential customers is known as A) prospecting. B) synchronizing. C) articulating. D) qualifying.
58) After prospects have been identified and qualified, the next step in the selling process is __________. This step requires the salesperson to learn as much as possible about the potential customers' wants and needs. A) product feedback B) the preapproach C) the presentation D) the trial close
59)
The approach step of the selling process attempts to A) qualify potential customers who are willing and able to buy. B) build credibility and establish rapport. C) close the sale. D) learn about potential customers wants and needs.
60)
The final step of the selling process involves
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A) follow-up. B) closing. C) qualifying. D) trial closing.
61) The purpose of a __________ is to move the selling process toward an actual product purchase. A) follow-up B) closing C) trial close D) commission
62)
In B2C sales the salesperson does not spend a great deal of their time A) following up. B) closing. C) qualifying. D) presenting.
63)
A review of the personal selling process indicates that selling is A) a matter of establishing relationships. B) getting a name on a sales contract. C) about 90 percent luck and 10 percent skill. D) giving way to computers in responding to consumer needs.
64) "You never get a second chance to make a good first impression," captures the importance of the __________ step in the selling process.
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A) prospecting B) introduction C) qualifying D) approach
65)
Which statement about the closing step in the selling process is the most accurate?
A) Closing is the final and most important step in the selling process. B) Once a sales presentation is completed, the salesperson should attempt to close as quickly as possible before the customer expresses any doubts or concerns. C) Closing may involve getting the customer to agree to a trial close. D) If the salesperson has done a good job of qualifying prospects and has developed a strong presentation, then closing is the easiest step in the selling process.
66) Treena just finished giving a sales presentation to a major prospect. Next, Treena will likely be A) processing the customer's order. B) closing the sale, by asking the customer to make a commitment. C) answering customer questions and dealing with objections. D) setting an appointment for the customer to meet with her boss.
67) Simone is a new salesperson for a medical supply company. She is compiling a list of pharmacies and independent stores that make medical supply buying decisions and plans to contact these businesses to determine what supplies they are currently using, and if they plan to purchase any additional supplies in the future. Identifying those decision makers who are willing to consider her products is called
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A) the supply chain. B) sales identification. C) a trial close. D) prospecting and qualifying.
68) Tyler’s client expressed concerns and questioned some of the details of the sales proposal once he completed his sales presentation. An effective salesperson would A) downplay these objections and push to close the sale as quickly as possible to avoid the endless questions that some customers ask. B) address the concerns and develop a better relationship. C) consider revising the presentation so that next time customer concerns and objections can be avoided. D) bring in the top executives of the company to close the sale.
69) The activity that evaluates public attitudes, changes policies and procedures in response to the public's requests, and executes a program of action and information to earn public understanding and acceptance is called A) public research. B) public relations. C) public communication. D) public advocacy.
70) __________ refers to any information about a product or an organization that is communicated to the public through the media and is not paid for or controlled by the sponsor. A) A market presentation B) Promotion C) Public relations D) Publicity
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71)
Compared to advertising, publicity offers the advantage of greater A) flexibility. B) continuity. C) believability. D) responsibility.
72)
A major responsibility of the public relations department is to
A) decide on the appropriate mix of advertising media. B) maintain close ties with the media, community leaders, government officials, and other stakeholders. C) identify appropriate markets for the firm's products, and then select the most likely customers in each market. D) train salespeople to interact better with their company's customers.
73)
Compared to other promotional tools, publicity A) costs more. B) offers the company little control over the message. C) prevents a response from competitive firms. D) is the easiest to manage.
74)
One way to see that publicity is handled well by the media is to A) pay for it. B) establish a friendly relationship with media representatives. C) write good press releases that attract attention. D) ask for the best location or time in the medium under consideration.
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75) Public relations has more power to influence consumers than other forms of corporate communication because A) it is an unpaid form of communication. B) only reputable firms use public relations to communicate with customers. C) the message comes via the media, which consumers consider trustworthy. D) there are no government regulations concerning public relations activities.
76)
A good public relations program recognizes that the A) company must not admit fault. B) firm must be willing to make changes in its policies and procedures. C) firm must be independent of production and service activities. D) media are not to be trusted since they profit by selling bad news.
77) Shayna finished writing a news release about her company's new product. She intends to e-mail the message to local television and radio stations as well as newspapers in hope that they will find the information newsworthy and run a story about the product. Shayna’s efforts represent the firm's A) public relations. B) institutional advertising. C) personal selling. D) interactive marketing.
78) Consumer research indicates that the public is very concerned about teenagers’ texting while driving. In response, Ringtone Phones Inc. has created a website providing parents with information to help avoid texting while driving. The firm also provides materials to cell phone retailers to help train their employees to speak with minors about this habit. What will be the most likely result of these efforts?
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A) They will likely backfire, since few people will believe a phone company would seriously support a program that might reduce their sales. B) They represent a key step in a good public relations program. C) They illustrate a push strategy applied to public relations. D) They will distract the firm from its primary mission of selling phones to adults.
79) Maggie faces the challenge of developing the promotion mix for a new business. Given the uniqueness of the new products and a very limited budget, Maggie confronts a creditability problem. She realizes that the promotional messages of an unknown firm may be met with skepticism. What should Maggie consider? A) publicity to help create a positive image for her firm and its products B) extensive use of persuasive advertising C) emphasizing personal selling rather than public relations D) changing jobs because this situation is hopeless
80) The promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities, such as trade shows, event sponsorships, and contests, is known as A) publicity. B) public relations. C) everyday low prices. D) sales promotion.
81)
Effective sales promotion activities target A) employees only. B) customers only. C) employees, dealers, and customers. D) dealers only.
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82) A __________ is designed to allow B2B buyers to see products online 24/7 without having to leave their office. A) virtual trade show B) direct mail promotion C) television infomercial D) marketing portfolio
83)
What is an example of consumer sales promotion activity? A) contests B) advertising C) vending sales D) direct mail
84)
What is an example of a B2B sales promotion activity? A) contests B) advertising C) vending sales D) conventions
85)
To generate enthusiasm about a good or service, sales promotion should A) target groups internally and externally. B) direct stockholders to sell their stock when prices increase. C) focus on reaching the B2B market. D) be discontinued because of time and cost limitations.
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86)
Which statement about sales promotion is most accurate? A) Sales promotions are targeted both internally and externally. B) Sales promotion efforts are directed exclusively at nonprofit organizations. C) Dealers are inappropriate targets of sales promotion activities. D) The only goal of sales promotion activities is to create consumer awareness.
87) At a recent soccer tournament, a local beer distributor gave free coolers to all adults with a paid admission. What is this an example of? A) market segmentation B) sampling C) publicity D) sales promotion
88) Crunchy Chip is a new, low-fat snack cracker created by the Good Health Company. To create interest for the Crunchy Chip, the company sent a free package of the snack crackers to selected homes along with a coupon. Good Health’s activities represent A) trade advertising. B) consumer publicity. C) sales promotion. D) public relations.
89) New Age Books partnered with Amazon to offer a unique __________. If you purchase 1 of 12 paperback books published by New Age, you can choose 1 of 12 Kindle versions for $3 (a much lower price than a regular Kindle version).
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A) sales promotion B) publicity stunt C) direct marketing opportunity D) advertisement
90) __________ encourages people to tell other people about goods or services they have enjoyed. A) Personal selling B) Publicity C) A virtual trade show D) Word-of-mouth promotion
91) __________ refers to such tactics as paying people to say good things about a product online or setting up multilevel selling schemes that reward people for directing their friends to a company's website. A) Demographic analysis B) Trade show advertising C) Viral marketing D) Direct mail
92) A __________ is especially effective in confirming a current customer’s belief that they bought the right product from the right company. A) testimonial B) news release C) viral message D) virtual endorsement
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93)
Two-way communication between businesses and customers becomes easier by using A) social media. B) viral marketing. C) product placement. D) mobile marketing.
94) The distribution method for audio and video programs online that lets users subscribe to a number of files or feeds is called a A) like. B) podcast. C) blog. D) tweet.
95) The strategy of directing advertising and sales promotion toward consumers to stimulate them to request the products from their local retailers is called a A) pull strategy. B) segmentation strategy. C) push strategy. D) product placement strategy.
96) The use of promotional tools to persuade wholesalers and retailers to stock and sell merchandise represents a A) pull strategy. B) segmentation strategy. C) push strategy. D) product placement strategy.
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97)
A successful social media promotional campaign includes
A) monthly photo postings. B) daily postings of images your customers want to see. C) hashtags for everything you post. D) strictly factual information for customers to read without distractions from other promotional efforts.
98) The box “The Rise and Fall of Insta-influencers” refers to what type of promotional effort taking place when celebrities are paid to discuss and endorse products on Instagram or Facebook? A) viral marketing B) publicity C) blogging D) word-of-mouth
99)
One way to increase the success of a company blog is to A) update it every six months. B) charge a fee to read it to imply the content is valuable. C) take time to post and respond to customer comments. D) send it via direct mail.
100)
Companies that adopt a pull strategy target their promotional efforts toward A) consumers. B) retailers. C) wholesalers. D) manufacturers.
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101)
The primary purpose of a pull strategy is to A) offer rebates and discounts to retailers and wholesalers. B) stimulate consumers to ask for a product, which then encourages retailers to stock it. C) pull the distribution network together to minimize costs and maximize profits. D) stimulate retailers to stock each product offered by a particular manufacturer.
102)
The primary purpose of a push strategy is to A) push products on consumers and convince them that they need the products. B) rush the production schedule for products and beat competitors to the market. C) push the product down the distribution channel to retail stores. D) push products away from traditional channels of distribution to save costs.
103) Heads Up Cola advertises their soft drinks during television shows that their target market typically watches. Heads Up believes the best way of reaching its customers is through a __________ strategy. A) push B) pull C) product placement D) word-of-mouth
104) Despite its name, Central Yogurt is located in a small shopping center far from customers. However, the company enjoys outstanding business because satisfied customers share their enjoyable experiences at Central Yogurt with their friends and relatives. Central Yogurt apparently benefits from positive
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A) trade advertising. B) word of mouth. C) sales promotion. D) public relations.
105) Registration in Mr. Schmidt’s psychology class reaches maximum enrollment quickly. Students register immediately online just to insure their seat in his class. One student summed it up: "Everyone's heard he is the best teacher on campus." Mr. Schmidt’s class benefits from A) viral publicity. B) positive public relations. C) free advertising. D) word-of-mouth promotion.
106) Marlo recently received poor service at a local restaurant. After dinner, Marlo made her complaints public by placing them online. What is this a form of? A) trade advertising B) institutional sales promotion C) public relations D) word of mouth
107) Kid-Time Movies markets its DVDs and Blu-rays online. Recently, Kid-Time adopted a new program that offers their current customers free rentals if they encourage their friends to visit Kid-Time’s website. What does this promotional program represent? A) personal selling B) viral marketing C) public relations D) blogging
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108) The Wisconsin Department of Travel and Tourism promotes the state by sending travel agents and tour bus companies information about the state's many attractions. The hope is that by stimulating interest in tour and travel agents, they will in turn encourage their customers to visit Wisconsin. This example represents a __________ promotional strategy. A) push B) pull C) sampling D) product placement
109) First Start uses its website to target auto parts stores and car owners and tell them of the benefits of using their long-lasting spark plugs. What strategy/strategies is First Start using? A) demographic strategy B) word-of-mouth strategy C) push and pull strategies D) product placement strategy
110) Summer Swede carries authentic Nordic gifts and clothing. The company uses a good deal of television advertising and sales promotion activities to attract consumers to retail shops in search of its brand. What strategy is Summer Swede utilizing? A) systems B) placement C) push D) pull
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111) When managing the promotion mix, marketers are utilizing technology to deliver important information directly to the customer. For example, during the spring planting season, Greenville Farms added QR codes to plants. When scanned with a mobile app, customers could make better buying decisions. The code offered information on planting time, watering schedule, and other pertinent tips on each plant. The company even ran a commercial to let its customers know how it was using technology to assist them with their spring planting decisions. Whether using new promotional methods or traditional promotional methods, Greenville Farms A) utilized pull strategy because it directed its campaign to the stores where the products are sold. B) utilized push strategy because it directed its messages to consumers, permitting them to subscribe to the pick economy. C) utilized pull strategy because it directed its messages to consumers. D) utilized push strategy because it directed its messages to its stores that were already equipped with bar code technology.
112) The Xer-Wise Corporation manufactures and markets high quality home exercise equipment. The firm has just developed a new piece of equipment that top executives believe will be a big seller if promoted correctly. The new product uses a system of adjustable weights that can be arranged in various ways to allow the user to perform exercises that tone all major muscle groups. Additionally, unlike other strength building machines, this equipment also incorporates a recumbent bicycle to provide a complete cardio workout. The entire piece of equipment is easy to assemble, and when not in use it can be folded into a compact unit that is easy to store. A group of fitness experts have tested the equipment and have provided rave reviews. Company executives believe that this product, called the MuscleMaster, will appeal to busy young adults living in relatively small apartments. Melody Fitt and Tom Trym have been assigned the responsibility of developing a promotion mix for this product. The team of Fitt and Trym is convinced that they can develop a successful promotion mix for this outstanding product.
112.1) Before they look at specific promotional tools, Melody and Tom agree that they want a promotion mix that is both comprehensive and unified. They want to use all of the promotional tools at their disposal to create a consistent message that promotes a favorable product image. Melody and Tom want to implement a(n)
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A) internal marketing program. B) integrated marketing communication program. C) multilevel market coordination plan. D) stakeholder response communication system.
112.2) Due to the unique nature of this product, Tom and Melody have decided to develop a half-hour television program to demonstrate the benefits of the MuscleMaster. It is hoped that this __________ will provide a great start in the market. A) interactive television ad B) online television ad C) infomercial D) publicity commercial
112.3) Tom and Melody are considering the extensive use of ads in fitness magazines and a direct mail campaign targeted at people who have bought other products made by Xer-Wise. Since these messages are geared directly to customers, it is clear that Tom and Melody want to implement a __________ strategy. A) push B) pull C) placement D) stretch
112.4) Tom and Melody have decided to work together to write a news release that describes the benefits of MuscleMaster and cites the rave reviews of the fitness experts who have already tried the equipment. They intend to send the release to a list of columnists who write in fitness magazines or have health and fitness columns in newspapers, hoping that some of these writers will include information about the MuscleMaster in their articles. Tom and Melody hope to utilize
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A) publicity. B) a push strategy. C) viral marketing. D) swag promotion.
112.5) Xer-Wise markets and promotes its products to consumers online. Melody and Tom are considering a more aggressive approach to generate enthusiasm for the MuscleMaster over the Internet. They have discussed offering young adults free T-shirts and special discounts on Xer-Wise equipment if they will agree to hype the benefits of the MuscleMaster on Facebook. They are even considering setting up a program in which customers get commissions for directing friends to the Xer-Wise website. If they adopt these strategies, Tom and Melody would be utilizing A) secondary marketing. B) viral marketing. C) unified marketing. D) extended reach marketing.
113) As a component of the promotion mix, advertising denotes all the activities marketers use to inform people about products and persuade them to participate in an exchange. ⊚ true ⊚ false
114) A firm's marketing mix refers to the combination of different promotional tools used to persuade consumers to participate in an exchange. ⊚ true ⊚ false
115) Integrated marketing communication refers to the combination of promotional tools to create a comprehensive, unified promotional strategy.
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⊚ ⊚
true false
116) Integrated marketing communication is the tool marketers use to determine the best price for a product. ⊚ true ⊚ false
117) plan.
Public relations efforts are not a component of an integrated marketing communication ⊚ ⊚
true false
118) Creating a unified positive image of a company in the public's mind is the end result of effective integrated marketing communication. ⊚ true ⊚ false
119) Combining a firm's promotional tools and resources to create a positive brand image is the goal of integrated marketing communication. ⊚ true ⊚ false
120) The promotional budget will clarify how much can be spent on advertising and personal selling. ⊚ true ⊚ false
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121) The first step in creating a promotional campaign is to define the objectives for each element of the marketing mix. ⊚ true ⊚ false
122) The last step in creating a promotional campaign is to evaluate the effectiveness of each element of the promotional mix. ⊚ true ⊚ false
123)
For some companies, the product itself can also be used as a promotional tool. ⊚ true ⊚ false
124)
A firm's promotion mix consists of its pricing and distribution strategies. ⊚ true ⊚ false
125) When developing the promotional campaign for a new product, the first step for a firm is to identify their target market. ⊚ true ⊚ false
126) Gwen developed an advertising message for one of her firm's new products. She sent copies of the ad to all the salespeople in the firm and asked them to stress the benefits mentioned in the ad when they call on their customers. Finally, the ad includes a free sample coupon to encourage people to try this new product. She is attempting to create one positive, unified brand image for the new product. Gwen is using public relations to promote the product. ⊚ true ⊚ false
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127) James is a salesperson for Partners Publishing. His activities are part of Partners' promotion mix. ⊚ true ⊚ false
128) Jaffy Luxury Interiors has adopted integrated marketing communication. This means the firm now puts less emphasis on public relations, sales promotion, and personal selling, and concentrates on advertising designed to provide a uniform message to all markets. ⊚ true ⊚ false
129) Depending upon the promotional campaign, advertising may include paid and nonpaid forms of nonpersonal communication. ⊚ true ⊚ false
130) Trade advertising is advertising to consumers by manufacturers to encourage them to try their products. ⊚ true ⊚ false
131) Institutional advertising creates an attractive image for an organization rather than for a product. ⊚ true ⊚ false
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132) Advocacy advertising is advertising that supports a particular view of an issue such as saving wildlife that’s nearly extinct. ⊚ true ⊚ false
133) When a manufacturer advertises to wholesalers and retailers in an attempt to encourage them to carry its products, it is engaging in institutional advertising. ⊚ true ⊚ false
134) The purpose of institutional advertising is to create an attractive image for an organization. ⊚ true ⊚ false
135)
Advertising covers the major production costs of television and radio programs. ⊚ true ⊚ false
136)
Newspapers, radio, and directories are usually attractive to local advertisers. ⊚ true ⊚ false
137)
Advertising helps to cover some of the production costs of newspapers and magazines. ⊚ true ⊚ false
138)
The major complaint with advertising is that it provides no real benefits to the public.
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139)
true false
Radio advertising is more costly than TV advertising but it typically reaches more people. ⊚ true ⊚ false
140) In terms of dollars spent, U.S. digital advertising expenditures have surpassed those of television and newspapers combined. ⊚ true ⊚ false
141) Prior to the digital advertising age, television ranked as the number one advertising medium. ⊚ true ⊚ false
142) Newspaper advertising expenditures continue to grow at a faster rate than in previous years. ⊚ true ⊚ false
143) Direct mail, television, and newspapers are the top three advertising media when ranked by total expenditures. ⊚ true ⊚ false
144)
Newspaper and radio tend to be attractive mediums for local advertisers.
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⊚ ⊚
true false
145) Because television advertising is so expensive, it is less popular than in the past, and it now ranks sixth in total advertising expenditures. ⊚ true ⊚ false
146)
Advertising spending for outdoor ads is about equal to advertising spending on radio ads. ⊚ true ⊚ false
147)
Total U.S. advertising spending for 2020 is estimated at nearly $250 million. ⊚ true ⊚ false
148)
Interactive advertising allows the customer to select what information they receive. ⊚ true ⊚ false
149) Radio advertising is especially beneficial for products that people don’t usually take time to read about. ⊚ true ⊚ false
150) A full-length television program made to look like a television show but devoted exclusively to promoting goods and services is called an infomercial.
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⊚ ⊚
true false
151) With the increase of digital advertising, infomercials are now more commonly used in print advertising media. ⊚ true ⊚ false
152) When marketers advertise on a big online search engine like Google, they can reach the people they most want to reach. ⊚ true ⊚ false
153) One of the benefits of advertising online is that it provides a way to link firms and customers so that they can learn more about each other. ⊚ true ⊚ false
154) Interactive promotion allows customers and companies to work together to create mutually beneficial exchange relationships in an ongoing dialogue. ⊚ true ⊚ false
155) Online advertising allows advertisers to see how many people have clicked on an advertisement and how much of it the potential customer has read or watched. ⊚ true ⊚ false
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156) Technology has changed the emphasis of promotion from promoting to customers to working with customers. ⊚ true ⊚ false
157) It is important for companies to include managers in customer engagement as part of their social media strategies. ⊚ true ⊚ false
158) The main intention of interactive promotion is to create a monologue that convinces customers to act quickly. ⊚ true ⊚ false
159) When it comes to reaching global markets, evidence supports the conclusion that the "one size fits all" approach to promotional mix design is best. ⊚ true ⊚ false
160)
Global advertising can save companies money in research and ad design. ⊚ true ⊚ false
161) The trend is for marketers to move from a regionalism-based advertising approach to one based on globalism. ⊚ true ⊚ false
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162) When advertising in global markets it is important to remember that brand names and promotional campaigns can often be translated differently into a local language from what the marketer intended to say. ⊚ true ⊚ false
163) To be successful in global advertising it is important to understand the culture of the country the advertisement will be shown in. ⊚ true ⊚ false
164) In order to be considered advertising, the organization being promoted in the advertisement must be identified in the message. ⊚ true ⊚ false
165) The use of infomercials has proven to be an effective use of advertising dollars for some products. ⊚ true ⊚ false
166) It is important to design promotional efforts with great care for individual countries or cultures at risk of a brand not appealing to the targeted market. For example, a Japanese company tried to use English words to name a popular drink and called it Pocari Sweat. ⊚ true ⊚ false
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167) According to the box “Adapting to Change,” streaming services like Hulu are being referred to as “advanced TV” because marketers can tailor their promotional efforts to the individual user. ⊚ true ⊚ false
168) As mentioned in the box “Reaching Beyond Our Borders,” although Nabisco knows that there are varying tastes around the world, they focus primarily on selling original Oreos worldwide. ⊚ true ⊚ false
169) Businesses pay for product placement to have their products displayed as part of a television episode or in a feature movie. ⊚ true ⊚ false
170) A company making and selling hinges to door manufacturers would use business-tobusiness advertising. ⊚ true ⊚ false
171) A newspaper advertisement about a sale at the local shoe store is an example of trade advertising. ⊚ true ⊚ false
172) Future Green is an organization concerned with preserving natural habitats and prairie areas. They hope to raise the public's awareness regarding this issue. Future Green can communicate their concern by utilizing advocacy advertising.
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⊚ ⊚
true false
173) Bob’s Brakes Inc. advertises its monthly specials by comparing the services it provides for $99 to the services provided by its biggest competitor for $159. Bob’s Brakes is using institutional advertising. ⊚ true ⊚ false
174)
Personal selling involves the face-to-face presentation and promotion of products. ⊚ true ⊚ false
175)
Persuading others to buy your product represents the only goal of effective selling. ⊚ true ⊚ false
176)
Effective selling involves helping others to satisfy their wants and needs. ⊚ true ⊚ false
177) Since personal selling involves face-to-face contact with customers, salespeople make little if any use of technology in performing their jobs. ⊚ true ⊚ false
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178) Personal selling involves more than presenting the product and closing the deal. Other activities include the search for new prospects and follow-up services after the sale. ⊚ true ⊚ false
179) Closing the sale represents success for the salesperson and the final step in the selling process. ⊚ true ⊚ false
180) Validation refers to the process of determining whether a potential customer has the need for a product, the authority to buy, and the willingness to listen to a sales message. ⊚ true ⊚ false
181) The first step in the selling process involves prospecting for potential customers and choosing those most likely to buy. ⊚ true ⊚ false
182) The purpose of a trial close in the selling process is to learn as much as possible about customers and their wants and needs. ⊚ true ⊚ false
183) The B2B selling process may take a long time before a deal is finalized; therefore, gathering information about the customer before you approach them is critical. ⊚ true ⊚ false
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184)
B2C salespeople spend more time prospecting their customers than do B2B salespeople. ⊚ true ⊚ false
185)
After-sale follow-up is an important but often neglected step in B2C sales. ⊚ true ⊚ false
186)
The B2C selling process has fewer steps than the B2B selling process. ⊚ true ⊚ false
187)
Personal selling is one of the least costly ways a firm can promote its products. ⊚ true ⊚ false
188) Questions and objections from customers following a sales presentation indicate that a salesperson was poorly prepared for the presentation. ⊚ true ⊚ false
189) To be successful, salespeople find that their job responsibilities extend far beyond just closing the sale. ⊚ true ⊚ false
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190) Effective salespeople push hard to finalize a sale as soon as they finish their presentation. Otherwise, the customer has time to come up with objections that will make the sale more difficult to close. ⊚ true ⊚ false
191) The interior designer was presenting a trial close when he asked the client, “What is the best day for me to stop by with samples and finalize your order?” ⊚ true ⊚ false
192) Brenda is a salesperson at one of State Street Electronics' retail stores. As an effective salesperson, Brenda is expected to help her customers resolve any doubts they might have before the sale and follow up to ensure that the customer is satisfied after the sale. ⊚ true ⊚ false
193) Marty is a salesperson for a firm that markets products in a B2B market. His wife, Shayla, is a salesperson for a retail store selling top-quality kitchen appliances. While Marty is likely to be successful using follow-up after the sale, Shayla should avoid this approach. ⊚ true ⊚ false
194) After her sales presentation, Annette asks her customers what color they prefer and if they would like to pay by credit card. She hopes that these questions will help the sales process move beyond the customer's questions and objections. With limited time, Annette is utilizing a trial close to help finalize the sale more quickly. ⊚ true ⊚ false
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195) Xavier is a salesperson for a firm that sells and leases theater lighting, staging, and production equipment. This equipment is very expensive and is highly specialized. Xavier spends a great deal of time learning about potential customers' needs, then locates exact specifications of equipment offered by all the major producers in the industry. Armed with this information, Xavier identifies the best equipment for each job. Xavier has completed the preapproach stage of the selling process. ⊚ true ⊚ false
196) As customers walk into Giggles Toy Store, they are approached by a salesperson who immediately greets and asks, "May I help you?" Studies indicate that this is an effective opening in the B2C sales process. ⊚ true ⊚ false
197) As one of the tools included in a firm's promotion mix, public relations is intended to earn public understanding and acceptance. ⊚ true ⊚ false
198) Effective use of public relations includes an evaluation of public attitudes and the execution of a program to earn public acceptance. ⊚ true ⊚ false
199) An effective public relations department regularly listens to and communicates with the public. ⊚ true ⊚ false
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200) An effective public relations program informs the public that the firm is responsive to their needs. ⊚ true ⊚ false
201) To be effective and maintain its independence, the public relations department should avoid establishing close relationships with the media, community leaders, and other corporate stakeholders. ⊚ true ⊚ false
202) Using effective public relations involves establishing a dialogue with customers so that information can be exchanged and trust can be developed. ⊚ true ⊚ false
203) Successful PR departments find that listening to the public is not enough. They have to tell the public that they are being responsive. ⊚ true ⊚ false
204) Public relations departments work exclusively with the media, avoiding the timeconsuming effort of interacting with individual customers. ⊚ true ⊚ false
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205) Using effective public relations requires listening to the public and developing policies that reflect the public's interest. ⊚ true ⊚ false
206) PR firms find that their services can be enhanced and improved by listening to the public in different forums including social media. ⊚ true ⊚ false
207)
Marketing is often referred to as the talking arm of public relations. ⊚ true ⊚ false
208)
Unlike other promotional tools, such as advertising and personal selling, publicity is free. ⊚ true ⊚ false
209) Compared to effective comparative advertising, publicity is generally considered less believable. ⊚ true ⊚ false
210) One fact that marketers must keep in mind is that publicity can be either positive or negative. ⊚ true ⊚ false
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211) Compared to advertising, publicity offers a firm greater control over when and how often the message is communicated. ⊚ true ⊚ false
212)
The media are not obligated to report publicity efforts. ⊚ true ⊚ false
213) The first step in the public relations process is to ensure that everyone in the organization understands the firm's position on key issues. With this information widely available, efforts can be made to persuade the public of the firm's virtues. ⊚ true ⊚ false
214) Businesses always welcome publicity because it presents the name of the firm and its products to the public for free. ⊚ true ⊚ false
215) Frank, a manager for a firm that produces camping equipment and climbing gear, is convinced that his firm markets the safest, highest-quality equipment in the entire industry. Recent studies from the Consumer Product Safety Commission support his position. Frank feels that the best way to create an image of high-quality, safe products is to develop an extensive advertising campaign. Frank correctly believes that publicity lacks the credibility that advertising can generate. ⊚ true ⊚ false
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216) While the Bark Attack Company has been commissioned to harvest trees in national forests, this activity is particularly unpopular with environmentalists and tourists. The best strategy to respond to this criticism is to ignore the complaints or views of the public and design an aggressive ad campaign emphasizing the jobs and economic benefits created by their logging operations. ⊚ true ⊚ false
217) Overton Mechanical Group demands complete control over any message communicated to the public regarding their products. The most efficient element of the promotion mix to achieve their desired control is publicity. ⊚ true ⊚ false
218) Sales promotion involves the long-term strategies firms use to enhance their image by listening to the public. ⊚ true ⊚ false
219)
Sales promotion programs can be used as a means to generate employee enthusiasm. ⊚ true ⊚ false
220)
Coupons, contests, and sampling are examples of sales promotion activities. ⊚ true ⊚ false
221) Internal sales promotion programs are targeted to reach the firm's internal auditors as well as external customers.
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⊚ ⊚
true false
222) Internal sales promotion efforts include training for salespeople and participation at trade shows where salespeople can meet potential customers. ⊚ true ⊚ false
223) Internal sales promotion efforts target salespeople and employees that handle customer complaints. ⊚ true ⊚ false
224)
The use of coupons and sales contests represents internal public relations. ⊚ true ⊚ false
225) A video a company produces to be used as a sales aid is a form of internal sales promotion. ⊚ true ⊚ false
226) Trade shows represent sales promotion programs designed to create product enthusiasm from distributors and dealers. ⊚ true ⊚ false
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227) Virtual trade shows are not effective at promoting tangible goods; therefore, they promote services rather than tangible products. ⊚ true ⊚ false
228) It's just as important to generate employee enthusiasm about a product as it is to attract potential customers. ⊚ true ⊚ false
229) Sampling represents a quick and effective way to demonstrate a product's superiority at the time when consumers are making a purchase decision. ⊚ true ⊚ false
230) Because customers eventually lose interest, businesses achieve the best results when they use sales promotion activities on a limited and irregular basis. ⊚ true ⊚ false
231) Effective sales promotion efforts focus exclusively on external audiences such as dealers and consumers, since they ultimately decide the fate of a product. ⊚ true ⊚ false
232) Sales promotion efforts such as trade shows aimed at distributors and dealers are intended to generate their enthusiasm for a firm's products. ⊚ true ⊚ false
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233) Owen is a salesperson for a vinyl siding contractor. This means he is included as part of the target audience for sales promotions from his own company. ⊚ true ⊚ false
234) Fire Up Sports Drinks introduced the Fruit First product line during spring break in Miami Beach. It gave out free samples, awarded Fruit First beach towels to participants, and provided free rides on Fire Up trucks. Fire Up was practicing event marketing. ⊚ true ⊚ false
235) Anything that encourages people to talk favorably about an organization may be effective word-of-mouth promotion. ⊚ true ⊚ false
236) Viral marketing involves strategies that get people to share a marketing message with others. ⊚ true ⊚ false
237)
The Internet has made it possible to eliminate any negative word-of-mouth promotions. ⊚ true ⊚ false
238)
A testimonial represents communication from a customer that praises a firm's products.
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⊚ ⊚
true false
239) While testimonials effectively promote a company’s products to new customers, they are not effective in promoting the actual company. ⊚ true ⊚ false
240)
Social media offers opportunities for positive and negative word-of-mouth promotion. ⊚ true ⊚ false
241) Social media is an easy way for customers to communicate with companies. However, it is not an easy way for companies to communicate with customers. ⊚ true ⊚ false
242) There are millions of blogs online, but businesses have found blogs do not serve much of a purpose since print advertising is more powerful. ⊚ true ⊚ false
243) Podcasting is a means of distributing audio and video programs that help a company gain a customer’s attention for an extended period of time. ⊚ true ⊚ false
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244) The success of a company’s blog is tied to whether or not the company responds to customers who leave comments. ⊚ true ⊚ false
245) Mobile technology allows marketers to promote products to consumers through smartphones using text alerts. ⊚ true ⊚ false
246) Even though advances in mobile media present some interesting opportunities, marketers expect that traditional promotions such as television advertising will dominate promotional efforts over the long term. ⊚ true ⊚ false
247)
Each target group a company is trying to reach requires a separate promotion mix. ⊚ true ⊚ false
248) Personal selling provides the most efficient element of the promotion mix for a firm attempting to create a good impression among a large group of consumers. ⊚ true ⊚ false
249) In evaluating the promotion mix, it's fair to say that large organizations are best reached through personal selling. ⊚ true ⊚ false
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250) A pull strategy utilizes consumer demand for a product to motivate retailers and wholesalers to actively market the product. ⊚ true ⊚ false
251) Successful push strategies result in consumers going into a store and asking for the product they have seen advertised. ⊚ true ⊚ false
252) The objective of a push promotional strategy is to move a product through a distribution channel by offering incentives to wholesalers and retailers to stock and sell the merchandise. ⊚ true ⊚ false
253) While word of mouth represents an effective promotional tool, the need for face-to-face communication limits its usefulness. ⊚ true ⊚ false
254) According to the box “Connecting through Social Media,” social media influencer endorsements have lost their impact because users can now easily access the same products and try them out for themselves. ⊚ true ⊚ false
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255) A business that invests heavily in consumer magazine advertisements for its products is focusing on a push promotional strategy. ⊚ true ⊚ false
256) Motivated by the impolite treatment he received at a running shoe store, Ray shared his bad experience on Yelp. He encouraged others not to frequent that store. Ray’s review represents negative word of mouth. ⊚ true ⊚ false
257) As she developed her company’s new social media campaign, Virginia decided she should begin by creating some fun and unique hashtags. This is the best first step Virginia can take. ⊚ true ⊚ false
258) Flat Belly promotes its ready-to-drink weight loss shake directly to consumers through television ads, infomercials, and online coupons. The company is making use of a push strategy to reach their customers. ⊚ true ⊚ false
259) Yogurt Craze utilizes newspaper and television ads designed to motivate potential buyers to seek out their product at the grocery store. This represents a push promotional strategy. ⊚ true ⊚ false
260) A television ad for the newest perfume that’s not yet available in stores but causes consumers to go to the store and ask for it is an example of a pull strategy.
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⊚ ⊚
true false
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Answer Key Test name: chapter 16 7) A 8) D 9) B 10) A 11) D 12) D 13) B 14) B 15) C 16) D 17) C 18) B 19) D 20) C 21) A 22) B 23) D 24) D 25) C 26) A 27) D 28) B 29) A 30) B 31) C 32) A
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33) D 34) B 35) B 36) A 37) C 38) C 39) A 40) D 41) B 42) B 43) C 44) A 45) C 46) A 47) B 48) A 49) D 50) A 51) A 52) B 53) C 54) B 55) B 56) A 57) D 58) B 59) B 60) A 61) C 62) C
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63) A 64) D 65) C 66) C 67) D 68) B 69) B 70) D 71) C 72) B 73) B 74) B 75) C 76) B 77) A 78) B 79) A 80) D 81) C 82) A 83) A 84) D 85) A 86) A 87) D 88) C 89) A 90) D 91) C 92) A
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93) A 94) B 95) A 96) C 97) B 98) D 99) C 100) A 101) B 102) C 103) B 104) B 105) D 106) D 107) B 108) A 109) C 110) D 111) C 112) Section Break 112.1) B 112.2) C 112.3) B 112.4) A 112.5) B 113) FALSE 114) FALSE 115) TRUE 116) FALSE 117) FALSE
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118) TRUE 119) TRUE 120) TRUE 121) FALSE 122) TRUE 123) TRUE 124) FALSE 125) TRUE 126) FALSE 127) TRUE 128) FALSE 129) FALSE 130) FALSE 131) TRUE 132) TRUE 133) FALSE 134) TRUE 135) TRUE 136) TRUE 137) TRUE 138) FALSE 139) FALSE 140) TRUE 141) TRUE 142) FALSE 143) FALSE 144) TRUE 145) FALSE 146) FALSE 147) FALSE
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148) TRUE 149) TRUE 150) TRUE 151) FALSE 152) TRUE 153) TRUE 154) TRUE 155) TRUE 156) TRUE 157) TRUE 158) FALSE 159) FALSE 160) TRUE 161) FALSE 162) TRUE 163) TRUE 164) TRUE 165) TRUE 166) TRUE 167) TRUE 168) FALSE 169) TRUE 170) TRUE 171) FALSE 172) TRUE 173) FALSE 174) TRUE 175) FALSE 176) TRUE 177) FALSE
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178) TRUE 179) FALSE 180) FALSE 181) TRUE 182) FALSE 183) TRUE 184) FALSE 185) TRUE 186) TRUE 187) FALSE 188) FALSE 189) TRUE 190) FALSE 191) TRUE 192) TRUE 193) FALSE 194) TRUE 195) TRUE 196) FALSE 197) TRUE 198) TRUE 199) TRUE 200) TRUE 201) FALSE 202) TRUE 203) TRUE 204) FALSE 205) TRUE 206) TRUE 207) FALSE
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208) TRUE 209) FALSE 210) TRUE 211) FALSE 212) TRUE 213) FALSE 214) FALSE 215) FALSE 216) FALSE 217) FALSE 218) FALSE 219) TRUE 220) TRUE 221) FALSE 222) TRUE 223) TRUE 224) FALSE 225) TRUE 226) TRUE 227) FALSE 228) TRUE 229) TRUE 230) FALSE 231) FALSE 232) TRUE 233) TRUE 234) TRUE 235) TRUE 236) TRUE 237) FALSE
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238) TRUE 239) FALSE 240) TRUE 241) FALSE 242) FALSE 243) TRUE 244) TRUE 245) TRUE 246) FALSE 247) TRUE 248) FALSE 249) TRUE 250) TRUE 251) FALSE 252) TRUE 253) FALSE 254) FALSE 255) FALSE 256) TRUE 257) FALSE 258) FALSE 259) FALSE 260) TRUE Student name:__________ 1) Explain the differences between managerial and financial accounting and give examples of the types of problems and issues examined by each of these areas of accounting.
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2) Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.
3)
Thoroughly describe each of six parts of the accounting cycle.
4) What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle?
5) Explain the meaning of the fundamental accounting equation and its relation to the balance sheet. If it is helpful, create an example using numbers.
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6) Explain the difference between current, fixed, and intangible assets. Give two examples of each of these different types of assets.
7) Identify the three key financial statements that corporations are required to prepare and describe the type of information found on each.
8) Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO?
9)
What is ratio analysis? Explain the four different types of ratios and how each is used.
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10) What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows?
11) An important difference between accounting and other business functions, such as marketing and management, is that A) accounting functions must be performed by an outsider, rather than by an employee of the business, in order to avoid conflicts of interest. B) accounting offers us insight into whether the business is financially sound. C) accounting involves mainly clerical activities and thus requires very little analysis. D) accounting deals exclusively with numbers.
12)
To effectively run a business, it is necessary to A) hire a full-time accountant. B) use a public accounting firm. C) understand and use accounting information. D) make certain that you do not spend too much time on your accounting system.
13)
What is an example of a financial transaction?
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A) A firm purchases a fire insurance policy. B) An internal auditor discovers an error in a firm's inventory valuation. C) A potential customer accesses a firm's web page. D) A manager reviews the financial statements prepared by an accountant.
14) Although accounting has several specific uses, the overall purpose of accounting can be summarized as A) to provide financial information that is useful to decision makers. B) to meet the legal requirements of the Financial Accounting Standards Board (FASB). C) to allow the government to track business activity levels. D) to compute the profit or loss and declared dividend of a business firm.
15) Which response is the best and most comprehensive? "A company's accounting information is useful to __________." A) managers within the firm, exclusively B) marketing research firms for pricing insights C) primarily the IRS and other government agencies that regulate the firm D) managers, owners, creditors, employees, and the government
16) Accountants record, classify, and __________ the results of the financial information they gather. A) interpret B) prioritize C) audit D) change
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17)
The reports and financial statements prepared by accountants
A) are more useful for profit-seeking businesses than they are for not-for-profit organizations. B) are mainly used to help the firm complete its tax forms. C) provide information that can be used by decision makers both inside and outside the organization. D) are not as useful now that firms have moved into a more global environment.
18)
The accounting profession follows generally accepted accounting principles as defined by A) GAAP. B) the PCAOB (Public Company Accounting Oversight Board). C) the FASB (Financial Accounting Standards Board). D) the Sarbanes-Oxley Act.
19) A person's pulse rate and blood pressure are indicators of a person's health. Similarly, __________ can help assess the health of a business. A) financial statements B) production schedules C) economic outlook reports D) industry performance standards
20) Accounting transactions are important to a firm's operations. What activities would affect the firm's account balances? A) buying and selling goods and services B) interviewing prospective employees C) understanding economic reports D) forecasting consumer demand
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21) Given that measuring a firm's financial health is important to its survival, which strategy is good advice for a person just starting a business? A) Create a method for keeping your books that makes sense to you. Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books. B) All transactions are important. Separating transactions only serves to create a perception that some transactions are of lesser importance than others. C) Accounting systems used by big business are not suitable for small businesses. D) Select an accounting system that helps you make decisions, and helps you report information to others outside your firm.
22)
As an accountant, Sanjana’s responsibilities include A) developing plans to help her company establish a supply chain. B) setting prices for specific goods and services. C) summarizing and interpreting financial information needed by her firm's managers. D) developing a fringe benefit program that improves employee morale.
23) Anya wants to start her own business but knows little about how to set up an accounting system or interpret financial information. "I'm not worried about accounting," she tells her friends. "I'll just hire a part-time bookkeeper to handle all that type of stuff and focus my attention on what I like—finding ways to satisfy my customers." What would be the best response to Anya’s comments?
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A) Fine. Just make sure the bookkeeper you hire knows how to use a database, since this type of software is the heart of any efficient accounting system. B) Although you can hire someone to keep your books, you'll still need to know how to read, understand, and interpret basic accounting reports in order to make good business decisions. C) Most entrepreneurs would agree with your opinion. The work done by accountants is mainly clerical in nature, so time spent by business owners on accounting tends to take them away from more important tasks. D) You have a good plan. Only managers of large firms require knowledge of accounting. Owners and managers of small businesses can easily get by with just a part-time bookkeeper.
24) Rather than take an accounting class, Isaac enrolled in a marketing class at the local community college before starting his landscape business. He decided that his time would be better utilized in this class because if he could learn to sell his services well and the revenues and profits would follow. What would be your assessment of his plan? A) Isaac understands that marketing is the lifeblood of the company, and he is right on track with his approach. B) Isaac has elected to operate like a virtual company and leave various parts of the business including accounting, environmental trends scanning, and management to outsourcers. C) Isaac knows that increasing revenues will always keep the business profitable and in a positive cash position. D) Isaac needs to realize that the ability to understand and interpret financial statements provided by accounting might enhance his profits.
25) Jaden is opening a small sports store in his town. At the advice of a friend who is a bookkeeper, he keeps the receipts of everything he purchases for the business in the bottom drawer of his desk, along with all other business expenses, such as his retail license, his rent expense, and insurance expense. You suggest to Jaden that he
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A) continue with this procedure, but only until the store opens, at which time he will need an additional drawer for his sales transactions. B) invest some time in exploring an accounting system that will make it easier to classify and summarize accounting information. C) continue with this procedure because there is very little difference between one expense and another. D) stop wasting valuable time saving the receipts because accountants only record sales transactions.
26) As a step in the accounting cycle, __________ involves the recording of business transactions. A) marketing B) bookkeeping C) auditing D) economics
27) __________ is the accounting practice of recording each transaction in two places in the accounting journal. A) Double-entry bookkeeping B) Trial balancing C) Account matching D) Entry duplication
28) A __________ is a specialized accounting book, where transactions are categorized according to type. For example, all utility transactions are recorded in the same category.
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A) journal B) trial balance C) ledger D) balance sheet
29)
A bookkeeper's first task is to A) separate all of the firm's transactions into meaningful categories. B) take a trial balance. C) summarize the firm's financial data. D) record transactions in a ledger.
30)
In the course of their jobs, bookkeepers A) interpret accounting data. B) approve decisions about major expenditures. C) record business transactions. D) prepare financial statements.
31) The accounting book or computer program where each day's transactions are first recorded is called a A) posting workbook. B) general ledger. C) balance sheet. D) journal.
32) A __________ summarizes all the data from the account ledgers to verify that they are correct and balanced.
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A) ledger statement B) balance sheet C) trial balance D) statement of cash flows
33)
The purpose of a trial balance is to A) affirm whether the figures in the account ledgers are correct and balanced. B) prepare a mockup of a real balance sheet. C) review the income statement accounts. D) meet a reporting requirement of the Securities and Exchange Commission (SEC).
34) The __________ is a six-step procedure that results in the preparation and analysis of the major financial statements. A) double-entry method B) financial management process C) fundamental accounting equation D) accounting cycle
35)
Once a trial balance has been prepared, the next step of the accounting cycle involves
A) posting the information to the correct ledger accounts. B) completing a balance sheet and ratio analysis. C) preparing financial statements such as the balance sheet, income statement, and statement of cash flows. D) classifying the transactions into logical categories.
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36) a(n)
One of the key financial statements prepared in the fifth step of the accounting cycle is
A) general journal. B) statement of cash flows. C) asset summary. D) social audit.
37) The balance sheet, the statement of cash flows, and the __________ are three key financial statements prepared by accountants. A) income statement B) statement of retained earnings C) statement of changes in financial position D) trial balance
38)
The sixth and final step in the accounting cycle involves
A) performing a trial balance to verify that the accounting statements are internally consistent. B) auditing the books to ensure that they were prepared according to generally accepted accounting principles. C) preparing the income statement. D) analyzing major accounting statements to evaluate the financial condition of the firm.
39)
As it pertains to their use in accounting, computers A) will soon eliminate all accounting functions. B) are tools to help the accountant perform his or her job. C) are of little use to small-business owners that need accounting services. D) have limited use in accounting due to inadequate privacy controls.
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40)
Today's computerized accounting programs are
A) helpful for small-business owners who lack strong accounting support within their companies. B) too expensive and complicated for most small businesses. C) a poor investment for small start-up companies since these programs are seldom needed unless the firm is considered a mid-sized to large company. D) so sophisticated that they can make most financial decisions without the aid of an accountant.
41)
Accountants not only provide financial information to the firm, they A) replace the firm's need for managers. B) provide information regarding competitors. C) assist in interpreting that information. D) perform audits of financial information.
42)
A comparison of bookkeeping and accounting indicates that
A) the two are virtually the same in practice. B) bookkeeping involves recording financial information, while accounting is concerned with classifying, summarizing, and interpreting this information. C) bookkeeping is more useful for small businesses while accounting is more useful for large businesses. D) accounting is a subsystem of the process of bookkeeping.
43) Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n)
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A) auditor. B) forensic accountant. C) bookkeeper. D) purchasing agent.
44)
A key step in the accounting cycle is to A) record information into journals. B) collect data from customers. C) forecast expenses and revenues. D) prepare the advertising message.
45)
The main reason an accountant would conduct a trial balance is to A) determine whether account figures in the ledger are correct and balanced. B) obtain an estimate of the amount of taxes the firm owes. C) ensure the audit was done correctly. D) verify the validity of last year's balance sheet before beginning the next accounting
cycle.
46)
The use of computerized accounting systems
A) makes it possible for most firms to operate without the expense of hiring or consulting with accountants. B) reduces the pressure on managers in making financial decisions. C) allows firms to generate financial information almost instantly and whenever the organization needs it. D) creates an environment in which accounting has become nothing more than glorified bookkeeping, as all accountants are required to do is enter data into the system and monitor the results the program generates.
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47) Using computers to post information from journals to the ledger instantaneously has the benefit of A) reducing the number of accountants required by the firm. B) less scrutiny from agencies such as the Internal Revenue Service. C) shifting financial decision-making from people to programmed technology. D) having access to readily available financial information.
48)
Candace is categorizing journal entries in order to post to the A) income statement. B) balance sheet. C) working papers. D) ledger.
49) Ty owns and operates a small business with only four full-time employees and less than $500,000 in annual sales. He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order. In evaluating the possible adoption of a computerized accounting system, Ty will probably discover that A) the expense of setting up a computerized accounting system would not be affordable at this time. B) he would be better off hiring a full-time accountant. C) he could benefit from adopting such a system but should also consult with an accountant for advice about what's best. D) a computerized system would be affordable, but that he would have little need for it unless his company became significantly larger.
50) Mahie is a bookkeeper for the Randall Corporation. She takes the firm's transactions and records them in a record book or computer program referred to as
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A) a credit account. B) an asset database. C) a journal. D) a debit program.
51) Javier works in his company’s accounting department where it is his job to record all transactions into journals. After completing this task, the next step in the accounting process is to A) prepare the firm's financial statements. B) post the information to the ledger. C) determine the tax liability of the firm. D) balance the difference between assets and liabilities.
52) Paul is responsible for recording sales transactions at his company. To minimize entry errors, Paul uses a(n) __________ process. A) auditing B) capital budgeting C) double-entry bookkeeping D) revenue assessment
53) Joy Lee works in the accounting department of Campton Manufacturing. Today she will use the firm's ledger to summarize information that was posted over the most recent time period. Her goal is to determine if the accounts are balanced as required by the double-entry method of bookkeeping. To be sure they are correct, Joy Lee will prepare a(n) A) account analysis. B) statement of cash flows. C) balance sheet. D) trial balance.
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54) Noel works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Noel’s next task is likely to be A) conducting the full audit. B) preparing a tax return for the company. C) preparing the store's balance sheet and other major financial statements. D) presenting the trial balance to the company owners.
55) Aiden has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves A) posting the results of these statements to the appropriate journal. B) analyzing the firm's financial statements to evaluate the financial condition of the firm. C) conducting forensic tests of the data to ensure its accuracy. D) placing the data used to construct the statements into an archive known as a data warehouse.
56) Made-to-Order Metalworks is a small manufacturing firm specializing in custom-order tool and die work. A computerized accounting system would help this firm by A) making key accounting and financial decisions. B) helping management identify cash flow and other financial difficulties more quickly. C) eliminating the need to prepare financial statements and other reports. D) eliminating the need to perform the three middle steps of the accounting cycle.
57)
The three important financial statements prepared by accountants are
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A) ledger, journal, and trial balance. B) cash budget, capital budget, and master budget. C) revenue summary, expense summary, and consolidation statement. D) balance sheet, income statement, and statement of cash flows.
58) The __________ is an accounting statement that reports the financial condition of a firm at a specific point in time. A) income statement B) balance sheet C) statement of cash flows D) trial balance
59)
A firm's __________ reports the profit or loss for the firm over a specified time period. A) income statement B) balance sheet C) statement of cash flows D) bank statement
60) The __________ shows the assets, liabilities, and owners' equity of a firm, at a specific point in time. A) income statement B) balance sheet C) statement of cash flows D) cost of goods sold
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61) Which financial statement reports the company's revenues and selling costs over a period of time? A) income statement B) balance sheet C) statement of cash flows D) trial balance
62) A(n) __________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities. A) income statement B) statement of cash flows C) cash budget D) cash receivables and payables report
63)
The balance sheet is composed of which three accounts? A) revenue, expenses, and earnings B) operating expenses, cash flow, and capital expenditures C) capital, cost, and valuation D) assets, liabilities, and owners' equity
64)
A balance sheet lists assets in order of their A) dollar value, from smallest to largest. B) date of acquisition, with the most recently acquired assets listed first. C) liquidity, with the most liquid assets listed first. D) income generating ability.
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65)
__________ refers to how quickly an asset can be converted into cash. A) Liquidity B) Velocity C) Fundability D) Accessibility
66) When companies owe money to creditors, suppliers, and others, these outstanding amounts are recorded on the balance sheet as A) contra-assets. B) liabilities. C) owners' equity. D) expenses.
67)
__________ refers to the value that stockholders or owners have in a company. A) Assets B) Liabilities C) Owners' equity D) Liquidity
68)
The fundamental accounting equation states: Assets = A) Liabilities minus Owners' Equity. B) Liabilities plus Receivables. C) Payables plus Cash Equivalents. D) Liabilities plus Owners' Equity.
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69) Company resources that are purchased with the intention that they will convert to cash within one year are A) fixed assets. B) current liabilities. C) current assets. D) owners' equity.
70)
Resources that a firm owns are called A) revenues. B) assets. C) equities. D) credits.
71)
The most liquid asset is A) sales. B) cash. C) accounts payable. D) owners' equity.
72)
Patents and copyrights are classified as __________ on the balance sheet. A) fixed assets B) intangible assets C) current assets D) owners' equity
73)
Debts that are due in one year or less are classified on the balance sheet as
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A) current liabilities. B) bonds payable. C) callable bonds. D) immediate expenses.
74) The value of resources the firm owns, minus the amount of money the firm owes to others equals A) liabilities. B) liquidity. C) leverage. D) owners' equity.
75) The __________ account on the balance sheet shows profits that the firm has reinvested in the company. A) retained earnings B) stockholder's equity C) intangible assets D) notes payable
76)
Revenue, minus cost of goods sold equals A) retained earnings. B) fundamental accounting equation. C) gross profit. D) net income.
77)
Rent, depreciation, and salaries are examples of
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A) current assets. B) current liabilities. C) owners' equity. D) operating expenses.
78) __________ is the monetary value that is received for goods sold, services rendered, and money received from other sources. A) Revenue B) Gross margin C) Net income D) Cost of goods sold
79)
Net income refers to A) the result of deducting liabilities from the assets of the firm. B) the result of subtracting cost of goods sold from revenues. C) the result of deducting depreciation expense from revenues. D) the net earnings after the deduction of all expenses, including taxes
80)
Depreciation is a systematic write-off of the cost of a tangible asset that is listed on the A) statement of cash flows. B) balance sheet. C) income statement. D) statement of retained earnings.
81)
The statement of cash flows identifies cash receipts and disbursements that result
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A) from selling goods and/or services, exclusively. B) solely from a firm's investments. C) from a firm's operations and investment activities, but not from financing activities. D) from a firm's operations, investment, and financing activities.
82) The balance sheet is set up to reflect the Fundamental Accounting Equation. This equation shows A) Assets = Liabilities + Owners' Equity. B) Revenues – Expenses = Gross Profit. C) Cash Inflows = Cash Outflows. D) Current Assets + Current Liabilities = Owners' Equity.
83)
The bottom line of an income statement shows the firm's A) retained earnings. B) gross profit. C) net income or net loss. D) owners' equity.
84)
Expenses a firm incurs for insurance, office salaries, and rent are classified as A) selling expenses on an income statement. B) general expenses on an income statement. C) current liabilities on a balance sheet. D) general expenses on a cash flow statement.
85)
Debts owed by a business are called
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A) revenues. B) liabilities. C) equities. D) assets.
86)
__________ is the systematic write-off of the value of a tangible asset over its useful life. A) Liquidation B) Depreciation C) Capital budgeting D) Gross margin allocation
87) Accounting recognizes that assets, such as machinery and buildings, lose value over time. Accountants will record a portion of the cost of an asset as an expense each year through the use of A) asset valuation. B) asset audits. C) appreciation. D) depreciation.
88) The __________ shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time. A) income statement B) balance sheet C) statement of cash flows D) trial balance
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89) Use the fundamental accounting equation to solve the following: Assets minus Liabilities equals A) Net Income. B) Gross Margin. C) Owners' Equity. D) Cash Reserves.
90) Many business decisions are made in hopes of improving a firm's bottom line. Which of the following financial statements will reveal a firm's bottom line? A) income statement B) balance sheet C) statement of cash flows D) trial balance
91) A company's income statement is important to accountants and other stakeholders. It reveals a company’s A) sources of funding. B) ability to distribute goods or services in a timely manner. C) ability to earn a profit over time. D) capitalized value.
92)
When creating the income statement, which of the following statements is accurate? A) Revenues, minus General Operating Expenses = Gross Profit. B) Revenues, minus Tax Expense = Gross Profit. C) Revenues, minus Depreciation Expense = Gross Profit. D) Revenues, minus Cost of Goods Sold = Gross Profit.
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93)
What would be classified as a general expense on an income statement? A) salaries paid to salespeople B) dividends paid to stockholders C) payments made for insurance D) costs associated with an advertising campaign
94) Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit, and then sell the goods to their customers on credit. These companies sometimes have difficulty repaying their suppliers when customers who buy on credit don't pay on time. Firms that experience this difficulty need to do a better job of A) generating revenue. B) controlling inventory. C) managing cash flows. D) balancing assets with liabilities.
95)
FIFO and LIFO are two common A) depreciation strategies. B) ways to structure a balance sheet. C) inventory valuation methods. D) current ratios.
96)
The LIFO method of inventory valuation bases the cost of goods sold on the cost of A) merchandise that has been held in inventory for the longest period of time. B) most recent merchandise purchased by the firm. C) actual units customers purchased. D) merchandise the firm acquired at the lowest cost.
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97) During a period of rising prices, using FIFO (first-in, first-out) inventory valuation method will result in __________ net income figures than would LIFO (last-in, first-out). A) higher B) lower C) the same D) less accurate
98) Retailers attempt to sell older merchandise before more recently acquired merchandise is sold. The assumptions made by the __________ method of inventory valuation are most consistent with this approach. A) FIFO (first-in, first-out) B) LIFO (last-in, first-out) C) average costing D) accelerated costing
99) During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the __________ inventory valuation method. A) FIFO (first-in, first-out) B) LIFO (last-in, first-out) C) sliding scale D) average cost
100) Nellie sews custom tote bags and other novelty items which she sells at craft fairs. An accountant would consider her sewing machine, fabric, and other supplies she uses for her craft as
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A) assets. B) liabilities. C) owners' equity. D) intangibles.
101) Derek will graduate from State University this year. He has accumulated $29,000 in student loans during his four years at college. An accountant would classify the loans as A) assets. B) liabilities. C) owners' equity. D) intangibles.
102) The balance sheet for Hammill Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which statement is correct? A) Owners' equity equals $182,000. B) Current assets are worth $92,000. C) Net income for the period is $112,000. D) Owners' equity equals $112,000.
103) When reviewing the balance sheet for a pet grooming business, Randy noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business equals A) $2.2 million. B) $4.8 million. C) $3.5 million. D) $0.2 million.
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104) Lazy Day Laundry Company recently issued a corporate bond on which it expects to pay interest for the next twenty years. The company would record this as a __________ on its balance sheet. A) long-term asset B) retained earning C) long-term liability D) long-term expense
105) Kira is running an income statement on her computer accounting program. Which accounts will be used to calculate gross profit? A) revenues, net sales, depreciation, and operating expenses B) revenues, general expenses C) revenues, cost of goods sold, tax expenses, net income before taxes D) revenues, cost of goods sold
106) At the time Rico’s Restaurant Supply prepared its financial statements, it had several customers who bought goods over the past three months on its "90 days same as cash" credit plan. These customers had not yet paid their bills, but they have good credit ratings and Rico’s is confident that they will make their payments on time. The amount these credit customers owe would show up as part of the A) current assets listed on Rico’s balance sheet. B) current liabilities listed on Rico’s balance sheet. C) a deferred cash flow on Rico’s statement of cash flows. D) unrealized revenue reported on Rico’s income statement.
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107) Martin Mechanical installs HVAC systems in large newly constructed buildings. The company employs several expert installers who work on a full-time basis. Although the installation team works every day, the company pays them at the end of the month, for the previous month's work. Employee salaries are recorded as __________ on Martin Mechanical’s balance sheet. A) capital cash flows B) current liabilities C) retained earnings D) long-term liabilities
108) Darla is preparing her homework for her accounting class. She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements. Which statement is correct? A) Patents and copyrights are included with the firm's intangible assets on the balance sheet. B) Patents and copyrights are included with the firm's long-term liabilities on the balance sheet. C) Patents and copyrights are included with the firm's cost of goods sold on the income statement. D) Patents and copyrights are included with the firm's fixed assets on the balance sheet.
109) Brighton Consulting is a management-consulting firm that provides its expertise to businesses that employ its services. Since it does not hold an inventory of goods or produce any goods itself A) its revenue will equal its net income. B) its gross profit could be identical to its net revenue. C) it is unlikely to have any operating expenses. D) its balance sheet will not record any current assets.
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110) Fatima is concerned because during the past four months her company has had trouble paying its bills on time. She knows if this continues, the firm will have difficulties in accomplishing its goals. What is Fatima concerned with? A) asset disbursement B) cash flow C) depreciation D) inventory valuation
111) Mouna noted that she disbursed $7,847 in payments for operations in her travel agency and received $7,162 in cash receipts for services rendered. She had no cash receipts or disbursements from investments or financing activities. Thus, Mouna had a A) positive disbursement. B) negative cash flow. C) bad debt allowance. D) tax credit payment.
112) Crystal Clear Communications is considering the purchase of a new satellite. The firm believes the satellite will help generate future earnings. In addition, the firm recognizes the tax benefits of a lower net income provided by the annual __________ of the asset. A) inventory valuation B) declining balance C) appreciation D) depreciation
113) Riley and Gretchen run a shuttle service from Times Square to New York’s JFK airport. Last month, they recorded the following:
Revenues [25 trips @80 per trip]
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$
2000
Fuel Charge [25 trips @$30 per trip]
750
Banking Expenses
20
Insurance Expense
70
Van Depreciation
250
Taxes (@25%)
228
Riley and Gretchen’s gross profit for the past month was A) $682.00 B) Riley: $341.00; Gretchen: $341.00 C) $1250.00 D) $2750.00
114) Riley and Gretchen run a shuttle service from Times Square to New York’s JFK airport. Last month, they recorded the following:
Revenues [30 trips @80 per trip] Fuel Charge [30 trips @$30 per trip]
$
2400 900
Banking Expenses
20
Insurance Expense
70
Van Depreciation
250
If 25% of their net income is paid to the government in taxes, what is their net income after taxes?
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A) $1410.00 B) $1160.00 C) $682.00 D) $870.00
115) A firm’s statement of cash flows showed the following activities for the year ended December 31, 2021:
Cash from operating activities: Cash from investing activities: Cash from financing activities:
$
30,000 -15,000 -8,000
The year-end cash balance for this firm is: A) $7,000.00 B) $53,000.00 C) $23,000.00 D) $30,000.00
116) Similar to the example of FIFO and LIFO inventory accounting methods in the text, a college store purchased sweatshirts for the upcoming fall semester. Using the following data, where a total of 100 sweatshirts were purchased by the store and placed in inventory, select the correct statement from the following choices.
Inventory Purchase 50 Inventory 50 Date 8/1 Sweatshirts Purchase Date 9/1 Sweatshirts Cost per $ 12.00 Cost per $ 14.00 Sweatshirt Sweatshirt Selling Price $ 28.00 Selling Price $ 28.00 Total Sweatshirts sold from 8/1 – 12/31 = 50 Sweatshirts
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A) FIFO would provide the least profit. B) FIFO would provide the most profit. C) LIFO or FIFO will produce the same amount of profit. D) LIFO would provide the most profit.
117) The financial ratios that measure a firm's ability to pay its short-term debts are called __________ ratios. A) leverage B) liquidity C) equity D) profitability
118)
The current ratio is a type of __________ ratio. A) leverage B) profitability C) activity D) liquidity
119)
Which ratio is a liquidity ratio? A) inventory turnover ratio B) acid-test ratio C) debt to owners' equity ratio D) basic earnings per share
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120)
The purpose of the current ratio is to evaluate the firm's ability to A) generate sales with a given level of current assets. B) utilize current assets profitably. C) pay its bills in the short run. D) effectively use borrowed funds.
121) The __________ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory. A) acid-test B) cash flow C) diluted current asset D) required reserve
122) Financial ratios that reflect the degree to which a firm relies on borrowed funds are called __________ ratios. A) leverage B) liquidity C) activity D) profitability
123) Earnings per share, return on sales, and return on equity are examples of __________ ratios. A) leverage B) liquidity C) equity D) profitability
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124) __________ measures the amount of profit earned by a company for each share of outstanding common stock. A) Basic earnings per share (basic EPS) B) Diluted earnings per share (diluted EPS) C) Simple earnings per share (simple EPS) D) Return on shares outstanding (RSO)
125) __________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock, stock options, warrants, and convertible debt securities are also taken into account. A) Basic B) Diluted C) Restricted D) Broad-based
126) Generally, the higher the risk of failure or loss in an industry, means that investors will expect a __________ rate of return on the investment. A) higher B) lower C) more stable D) fluctuating
127) A firm's efficient use of its assets in running the business is key to maintaining sufficient cash flow. Ratios that accountants utilize to measure the efficient use of assets are called __________ ratios.
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A) leverage B) liquidity C) activity D) profitability
128) __________ measures the speed of inventory moving through the firm and its conversion into sales. A) Asset turnover ratio B) Inventory turnover ratio C) Sales turnover ratio D) Cost of goods sold turnover ratio
129) In order to understand if the results of ratio calculations indicate a financially strong company, the results A) should be compared to other firms in the same industry. B) are compared to same size firms in the same geographic region of the country. C) are compared to the norms established by generally accepted accounting principles. D) are compared to the largest firms in the country.
130)
If a firm has a debt to owners' equity ratio of 0.75 (or 75 percent) we can conclude that A) it has relied more on debt than equity to finance its operations. B) the firm is likely to have trouble paying its short-term debts when they come due. C) its total liabilities are less than its owners' equity. D) the firm has expenses that are exactly 75percent of its gross profit.
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131) Generally, a high __________ ratio could lead investors and creditors to view the company as being very risky. A) debt to owners' equity B) acid-test C) diluted earnings per share D) inventory turnover
132) In order to calculate the current ratio for your firm, you divide the total value of current assets by A) earnings per share. B) the total value of current liabilities. C) the total owners' equity. D) the total cost of goods sold.
133) Leverage ratios indicate the extent to which __________ has been used to fund a business's operations. A) debt B) equity C) owner invested capital D) profit
134) Play It Again sells a unique and vast assortment of sheet music. Its customers are high school and college band directors and choir directors who require several copies of the same music, including music written for a variety of instruments. To buy inventory for resale, the business seeks out wholesalers with large inventories. Since cash flow is always an important concern, the owner keeps a watchful eye on how quickly various genres of sheet music sell. To help him in this assessment, which ratio would be an important part of this company's financial analysis?
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A) asset turnover ratio B) inventory turnover ratio C) sales turnover ratio D) cost of goods sold turnover ratio
135) Your firm is a supplier to a major chain of discount stores. You have heard rumors that this chain of discount stores is struggling financially. Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts? A) liquidity ratios B) leverage ratios C) activity ratios D) profitability ratios
136) As a bank loan officer, you are considering a loan application by Endurance Sporting Goods. The company has provided you with the following information from its balance sheet:
Cash Account Receivable
$
25,000 45,000
Inventory
140,000
Fixed Assets
190,000
Current Liabilities
70,000
Long-Term Liabilities
90,000
Endurance Sporting Goods has a current ratio of:
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A) 1.0. B) 1.5. C) 2.5. D) 3.0.
137) Endurance Sporting Goods has just applied for a bank loan in order to expand the business. Using the most recent balance sheet data provided by the company owner, you calculate that the company's current ratio is 2.5. In your presentation to the company boss, you remark that Endurance Sporting Goods A) is currently having trouble meeting its short-term obligations. B) has $2.50 that it owes each month, for every $1.00 of cash that it is generating. C) has $2.50 of current assets for each $1.00 of current liabilities. D) doesn’t need to worry about whether it will be able to make loan payments since its current assets are tied up in inventory.
138) As a bank loan officer, you are considering a loan application by Endurance Sporting Goods. The company has provided you with the following information:
Cash Account Receivable
$
25,000 45,000
Inventory
140,000
Fixed Assets
190,000
Current Liabilities
70,000
Long-Term Liabilities
90,000
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Endurance Sporting Goods’ debt to owners' equity ratio (rounded to the nearest tenth of a percent) is A) 45.4%. B) 66.7%. C) 112.5%. D) 133.3%.
139) The company controller asked Nadine to determine if it could borrow more money for an expansion project. When she calculated a leverage ratio, she determined that the company already had 1.5 times as much debt as equity. Do you agree with her assessment that the company should back off with borrowing more funds at this time? A) Yes, but if the company would increase sales, it could go ahead with borrowing more funds. B) Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry. C) Yes, but the firm should pursue equity investment until the ratio equals 1:1. D) Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged.
140) You have just calculated the acid-test ratio for Endurance Sporting Goods [acid test ratio = 1.0]. As a loan officer for the local bank, you are called into your boss's office to interpret the results of this ratio. Which statement best reflects an understanding of these results?
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A) A company with an acid-test ratio = 1.0 demonstrates the ability to operate very conservatively. The bank should anticipate that this firm will always be able to meet its shortterm liabilities. B) This company is already having problems meeting its short-term liabilities. C) An acid-test ratio = 1.0 means that this firm has $1.00 in current assets for every $2.00 in current liabilities. Endurance is a well-run operation, as long as it can continue to sell off its inventory. D) An acid-test ratio = 1.0 tells us that without adequate inventory turnover, this company may represent a higher risk. Endurance’s acid-test ratio shows that the firm maintains $1.00 in current assets for every $1.00 in current liabilities.
141) Dustin, a recent college graduate with a degree in accounting, is helping a newly formed construction company set up its accounting system. Although the company had purchased accounting software, Dustin wants to make certain that future reports will distinguish between current liabilities and long-term liabilities. In the future, he will need to know the amount of total current liabilities in order to A) know when it is time to make a long-term mortgage payment. B) calculate if the company has purchased too much inventory for home building. C) analyze whether the company can afford to make capital purchases such as additional land acquisition. D) analyze whether the company has enough funds to pay the near-term bills.
142) Endurance Sporting Goods Company continues to perform well. Company executives credit this to the strong partnerships it enjoys with category killer and large discount chains. Last week Endurance reported basic EPS [earnings per share] = $.80/share. If the firm has 4,000,000 shares outstanding, net income after taxes for the same period would equal A) $80,000. B) $5,000,000. C) $3,200,000. D) $32,000.
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143) The top managers of Bickel’s Bookstores want to indicate to the firm's shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong __________ ratios. A) liquidity B) leverage C) activity D) profitability
144) Endurance Sporting Goods has reported net income after taxes = $3,750,000, with 18,250,000 shares outstanding. Basic Earnings per Share for Peak Performance is equal to approximately A) $0.21/share. B) $20.50/share. C) $4.87/share. D) −$2.00/share.
145) Franco plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which ratio will be an important measure of profitability for Franco? A) return on sales B) return on equity C) inventory turnover D) acid test ratio
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146) Isra is the owner of Rare Finds Books, a small eclectic-style bookstore in a bustling college town. Isra prides herself in selecting hard-to-find books and magazines that her clientele enjoy. Recently, Isra is experiencing a cash flow shortage, and she is concerned that she may be purchasing too many copies of each title. Having recently completed a business class, you suggest to Isra that she calculate the __________ ratio for her store, and then compare it to other stores in her industry. A) current B) debt to equity C) return on equity D) inventory turnover
147) We would expect the inventory turnover ratio for a luxury auto dealer to be __________ than the turnover for a convenience store. A) higher B) more meaningful C) lower D) less helpful
148)
The accounting profession is divided into 5 key working areas, two of which are A) auditing and managerial accounting. B) forecasting and logistical accounting. C) inventory control and budgeting. D) income accounting and expenditure accounting.
149) The area of accounting that provides managers inside the organization with information they need to make decisions is called __________ accounting.
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A) tax B) managerial C) informational D) financial
150) The preparation of financial statements for people outside the firm (creditors, unions, suppliers, and others) is the goal of A) auditing. B) financial accounting. C) managerial accounting. D) cost accounting.
151)
A(n) __________ provides accounting services to individuals or firms on a fee basis. A) contract accountant B) account agent C) public accountant D) independent accountant
152) An accountant who works for a single business or government agency is referred to as a __________ accountant. A) public B) private C) certified D) commission
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153) __________ involves the review and evaluation of the records that are used to prepare the organization's financial statements. A) Auditing B) Financial accounting C) Managerial accounting D) Certified bookkeeping
154) A(n) __________ is a yearly published statement of the financial condition, progress, and expectations of an organization. A) balance sheet B) independent audit C) mission statement D) annual report
155) A(n) __________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements. A) internal audit B) annual report C) independent audit D) certified audit
156) Skilled professionals who are primarily responsible for the development of strategies to minimize taxes are called A) tax accountants. B) certified public accountants. C) certified management accountants. D) certified internal auditors.
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157)
The accounting scandals of the early 2000s led many people to question the legitimacy of
A) ratio analysis as a means of evaluating the performance of a firm. B) the five-member Public Company Accounting Oversight Board (PCAOB) under the Securities and Exchange Commission (SEC) that had been created to oversee the accounting industry. C) publishing financial information about a firm on the Internet. D) allowing an accounting firm to do both consulting and auditing work for the same company.
158)
Important provisions of the Sarbanes-Oxley Act
A) approve corporate loans to directors of the company. B) encourage the destruction of financial documents. C) require the CEO and CFO of corporations to certify the accuracy of financial reports. D) encourage outside CPA firms to deliver several services to their clients, including auditing services and consulting services.
159) According to the “Adapting to Change” box, which professional is best able to detect the financial irregularities that often accompany fraud in an organization? A) an internal auditor B) a certified public accountant C) a forensic accountant D) the firm’s chief financial officer
160)
The __________ sets accounting standards used in government accounting.
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A) Federal Accounting Review Board B) Governmental Accounting Standards Board C) Securities and Exchange Commission D) Federal Reserve Board
161) As U.S. firms focus on cost cutting to stay competitive with producers in low-wage countries, they will rely on __________ to create strategies to help reduce costs. A) managerial accountants B) financial accountants C) government accountants D) auditors
162) Which agency would have the greatest impact on the methods used to record, classify, summarize, and interpret accounting information for the State of Nebraska’s Department of Transportation? A) Commission on Accounting Practices for State Governments B) Government Accounting Standards Board C) Independent Not-For-Profit Accounting Standards Board D) Institute for Public Sector Accounting Standards
163) A basic difference between managerial accounting and financial accounting is that managerial accounting
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A) adheres to rules set by the GASB, while financial accounting uses a different group of rules set by the FASB. B) involves the preparation of the balance sheet and income statement while financial accounting involves the preparation of the statement of cash flows. C) handles recording and classifying information about transactions that have no direct financial impact on the firm, while financial accounting handles the recording and classifying of information about transactions that do have a financial impact. D) provides information primarily intended for managers and others inside the company, while financial accounting provides information primarily intended for people outside the organization.
164) Sandeep works in the accounting department for a manufacturing firm preparing budgets and reporting production costs. What job does Sandeep hold? A) managerial accountant B) financial accountant C) tax accountant D) auditor
165) Esther has been helping Andre in preparing his personal income tax forms for a couple of years. Andre’s boss recommended Esther because she had done a good job setting up the company's new accounting system. Andre is very satisfied with Esther’s work and feels that the fees she charges are quite reasonable. Esther would be classified as a(n) A) independent auditor. B) private accountant. C) public accountant. D) accounting broker.
166) Qingyi just earned a bachelor's degree in accounting. He plans to go to work for the Salvation Army as an accountant. What job will Qingyi hold?
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A) private accountant B) public accountant C) forensic accountant D) independent accountant
167) A chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to A) produce an internal audit. B) take overall stock of its accounting functions. C) provide a "generally accepted practices" endorsement. D) perform an independent audit.
168) Vanessa, a retail store owner, has applied for a business loan. Her prospective banker has requested information concerning the financial condition of her business. Which accounting discipline is responsible for providing accounting information to outside stakeholders? A) management accounting B) financial accounting C) tax accounting D) certified bookkeeping
169) Stockholders of Bradford Manufacturing are concerned about irregularities in the firm's accounting system. One approach to identify problems in the records of the company would be to have a(n) __________ performed. A) internal audit B) independent audit C) unofficial audit D) GAAP analysis
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170) Oliver is an accountant employed by DLH Enterprises. Recently, he has spent much of his time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Oliver is a A) public accountant whose work is mainly concerned with auditing. B) public accountant whose work is mainly concerned with financial accounting. C) private accountant whose work is mainly concerned with managerial accounting. D) private accountant whose work is mainly concerned with financial accounting.
171) While reviewing the books at his firm, Uri noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year. As a recent business graduate, Uri felt confident that the changes needed clarification. To get another opinion, Uri suggested to the company's controller that the firm solicit A) the assistance of the Government Accounting Standards Board. B) the services of a certified internal auditor. C) the services of a senior executive at the IRS. D) the services of an independent auditor.
172) Minnie A. Wright-Hoff works as an accountant for Double Entry Doors, Inc. Her company sells and installs oversized garage doors needed by large vehicles. Most of Minnie's work involves helping department heads and other decision makers by measuring and reporting costs for their departments, and by identifying areas where departments are exceeding their budgets. However, as one of only three accountants employed by Double Entry Doors, Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments. For example, she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced. Her efforts revealed no problems, so she is now ready to start working on the firm's financial statements. Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report. She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items.
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172.1) The fact that Minnie spends most of her time measuring costs and checking to see if departments are staying within their budgets suggests that she is often involved in A) auditing. B) managerial accounting. C) bookkeeping. D) departmental certification.
172.2) The last major task Minnie completed before getting ready to prepare the firm's financial statements was the preparation of the A) cash budget. B) master budget. C) trial balance. D) internal audit.
172.3) The fact that Minnie wants to determine the "bottom line" for Double Entry Doors means that she is particularly interested in preparing her firm's A) income statement. B) cash flow statement. C) master budget. D) capital budget.
172.4) Double Entry Door's suppliers maintained very stable prices for many years, but Minnie has noticed that the cost of doors has been rising steadily for the past few years. She is concerned that, given the company's current accounting methods of basing its cost on the most recent doors purchased, this will result in a much lower net income than in the past. The most likely reason for her concern is that Double Entry has apparently been using
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A) the FIFO inventory valuation method to determine its cost of goods sold. B) a great deal of equity financing to purchase the doors. C) the LIFO inventory valuation method to determine its cost of goods sold. D) a depreciation method based on the average value of inventory.
172.5) Minnie knows that Double Entry has a lot of short-term debt coming due in the next year, and wants to make sure that the company will have the ability to make the required payments. Given a troubling downturn in construction activity over the past couple of months, she is not confident that Double Entry can count on selling its current inventory of doors before the debt comes due. Which of the following ratios would be most relevant to Minnie? A) current ratio B) debt to equity ratio C) return on sales D) acid-test ratio
173) Often, the success or failure of a business can be attributed to how well the business handles financial procedures. ⊚ true ⊚ false
174) Although managers who work for large firms must know something about accounting, people who run small businesses only need to know the basics of bookkeeping. ⊚ true ⊚ false
175) It is impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements.
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⊚ ⊚
true false
176) With increased computer technology, the ability to read and understand financial statements is no longer an important skill for managers. ⊚ true ⊚ false
177) Accounting provides information about the financial condition and operating performance of a firm. ⊚ true ⊚ false
178) The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better pricing decisions. ⊚ true ⊚ false
179) Inputs to the accounting system include a firm’s balance sheet and statement of cash flows. ⊚ true ⊚ false
180) Purchasing insurance, paying employees, and using supplies are examples of financial transactions. ⊚ true ⊚ false
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181) Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and investors of an organization. ⊚ true ⊚ false
182) Accountants do the work involved in recording financial events and transactions, but the actual classifying and interpreting of this data is left to financial managers. ⊚ true ⊚ false
183) Since they do not seek to earn a profit, there is no reason for nonprofit organizations to engage in accounting. ⊚ true ⊚ false
184)
Churches, schools, and charitable organizations all need accountants. ⊚ true ⊚ false
185)
Accounting involves both the recording and the interpreting of financial events. ⊚ true ⊚ false
186) In an effort to maintain a competitive advantage, firms do not share accounting information with people outside of the firm. ⊚ true ⊚ false
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187)
The U.S. government is a user of a firm's accounting information. ⊚ true ⊚ false
188) Good decisions are based on good information. Organizations need accounting—to provide good financial information. ⊚ true ⊚ false
189)
A firm's financial statements represent a health report regarding the condition of the firm. ⊚ true ⊚ false
190) Accounting, as the language of business, is solely concerned with providing information useful to managers of profit-seeking firms. ⊚ true ⊚ false
191) In an accounting system, inputs refer to events and transactions that occur within the business, while outputs refer to the journal entries and ledger categorization that occurs after the events and transactions are recorded. ⊚ true ⊚ false
192) Government organizations such as the IRS are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs as a way to minimize their tax burden. ⊚ true ⊚ false
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193) GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board. ⊚ true ⊚ false
194) Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm. ⊚ true ⊚ false
195) Daphne thinks her business will be successful if she just keeps her customers satisfied— therefore, she does not need to have a great deal of knowledge about accounting practices. ⊚ true ⊚ false
196) Jamal started a small nonprofit organization in his community to help local senior citizens with household tasks. Since Jamal’s firm is small and does not seek to earn a profit, accounting is not important for his business. ⊚ true ⊚ false
197) Micah owns his own small business, but he doesn't want to be bothered with accounting information. He tells his friends, "All I need accounting for is to prepare my income tax return for my business. I'll hire someone to do that for me." Micah’s attitude would be disastrous if he managed a large firm, but it is a reasonable view for a small business owner. ⊚ true ⊚ false
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198) Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities involved in bookkeeping. ⊚ true ⊚ false
199) A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm. ⊚ true ⊚ false
200) After recording a business's transactions, bookkeepers usually classify the recorded transactions into groups with common characteristics. ⊚ true ⊚ false
201)
A bookkeeper's first task is to record the firm's transactions in a journal. ⊚ true ⊚ false
202)
The books where accounting data are first entered are called journals. ⊚ true ⊚ false
203) Double-entry bookkeeping requires that every transaction be approved by two different people before it can be recorded. ⊚ true ⊚ false
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204)
Double-entry bookkeeping can help identify a recording error made by a bookkeeper. ⊚ true ⊚ false
205)
A ledger is where the initial record of a day's transactions is entered. ⊚ true ⊚ false
206) The accounting book that provides all the information about a single account in one place is called the ledger. ⊚ true ⊚ false
207) At present, accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses. ⊚ true ⊚ false
208) The accounting cycle is a six-step procedure that results in the preparation and analysis of major financial statements. ⊚ true ⊚ false
209) Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger. ⊚ true ⊚ false
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210) There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger. ⊚ true ⊚ false
211) The accounting cycle usually involves the work of both the bookkeeper and the accountant. ⊚ true ⊚ false
212)
The purpose of a trial balance is to prepare a practice balance sheet. ⊚ true ⊚ false
213)
One of the statements prepared in the accounting cycle is the statement of cash flows. ⊚ true ⊚ false
214) Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting. ⊚ true ⊚ false
215) Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.
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216)
true false
Accounting software has proven to be especially helpful for small-business owners. ⊚ true ⊚ false
217) One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions. ⊚ true ⊚ false
218)
Computerized accounting programs have eliminated the need to prepare a trial balance. ⊚ true ⊚ false
219) In addition to the tasks of recording and classifying accounting information, the best accounting software programs currently available for small businesses have the ability to make financial decisions, thus eliminating the need for owners of small businesses to consult with accountants or understand accounting terminology. ⊚ true ⊚ false
220) The steps in the accounting cycle do not need to be followed in the order stated. Monthly financial statements can be prepared with a good amount of accuracy, prior to posting in the ledger or preparing the trail balance. ⊚ true ⊚ false
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221) Avantika has been a bookkeeper for a small chain of hardware stores for nearly five years. Six months ago, her manager retired, and a new manager was brought in. The new manager routinely asks Avantika for information and advice about how to interpret the information she records. Avantika’s experience as a bookkeeper means she is qualified to provide this type of advice. ⊚ true ⊚ false
222) Claws and Paws Pet Stores recently hired an accountant to make sense of each day's transactions and keep better financial records for the business. The accountant showed the owner that the ledger in a computerized accounting system can automatically take entries and post them to the correct accounts in the ledger, making the bookkeeping tasks much easier. ⊚ true ⊚ false
223) Yeung prepares monthly financial statements for her client, Wrecker Auto Repair. Now, though, she must summarize the data in the accounting ledgers to determine if the figures are correct and balanced. Yeung will prepare a statement of cash flows in order to complete this step of the cycle. ⊚ true ⊚ false
224) Leon is the head of the accounting department at Pristine Painting. After completing the trial balance, he will proceed with the preparation of the balance sheet, the income statement, and the statement of cash flows. ⊚ true ⊚ false
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225) Lauren has discovered her small business needs a better way to maintain accounting records and analyze business opportunities. Currently, she uses a manual accounting system. These days, any accounting program should do an excellent job of meeting her firm's accounting needs. ⊚ true ⊚ false
226) Kayleigh wanted to combine her accounting degree with her love of kayaking so she started a kayak rental company at a nearby lake resort. One of her first business purchases was a computerized accounting program. She learned in her college classes that a good software system will eliminate accounting cycle steps and the time it takes for her to interpret the results. As she put it, "It should make the decisions for me!" ⊚ true ⊚ false
227) The key financial statements are the balance sheet, the income statement, and the statement of cash flows. ⊚ true ⊚ false
228) The income statement reports the difference between a firm's assets and its liabilities as of a certain date. ⊚ true ⊚ false
229)
A firm's statement of cash flows reports its financial condition on a specific date. ⊚ true ⊚ false
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230) The balance sheet reports revenues and selling costs for a specific period of time—a month, or a year, for example. ⊚ true ⊚ false
231)
An income statement reports what a company owns and owes on a certain day. ⊚ true ⊚ false
232)
Assets are reported on the firm's balance sheet. ⊚ true ⊚ false
233)
Liabilities are reported on the income statement. ⊚ true ⊚ false
234)
Assets are economic resources that are owned by a firm. ⊚ true ⊚ false
235) The fundamental accounting equation is as follows: Assets = Liabilities + Owners' Equity. ⊚ true ⊚ false
236) The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.
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237)
true false
A balance sheet is composed of assets, liabilities, and revenues. ⊚ true ⊚ false
238) The cost of goods sold includes all the costs of buying and keeping merchandise available for sale. ⊚ true ⊚ false
239)
Rent, salaries, insurance, and depreciation are examples of the cost of goods sold. ⊚ true ⊚ false
240) Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense. ⊚ true ⊚ false
241)
Rents, salaries, utilities, and insurance are examples of operating expenses. ⊚ true ⊚ false
242) The two major classes of operating expenses are current expenses and long-term expenses.
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true false
243) General expenses include anything the firm needs to market and distribute its goods and services. ⊚ true ⊚ false
244)
Net income before taxes is found by deducting total operating expenses from gross profit. ⊚ true ⊚ false
245) A statement of cash flows summarizes a company's cash receipts and cash payments over a period of time. ⊚ true ⊚ false
246) Cash flow statements identify three sources of cash receipts and disbursements: assets, liabilities, and owners' equity. ⊚ true ⊚ false
247) The statement of cash flows calculates cash flows from operations, investing activities, and financing activities. ⊚ true ⊚ false
248)
An analysis of the statement of cash flows can help a firm prevent cash shortages.
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true false
249) The statement of cash flows shows a firm's revenues, costs of goods sold, expenses, and net income. ⊚ true ⊚ false
250)
Mickey Mouse and the Geico Gecko are examples of intangible assets. ⊚ true ⊚ false
251) Assets are listed on the balance sheet in order of liquidity, with the most liquid assets listed first. ⊚ true ⊚ false
252)
The firm's most valuable assets are listed at the top of its balance sheet. ⊚ true ⊚ false
253)
Patents and copyrights are examples of intangible assets. ⊚ true ⊚ false
254)
Liquidity refers to how quickly liabilities must be paid.
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255)
true false
Net income is simply the difference between revenue and cost of goods sold. ⊚ true ⊚ false
256) The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows. ⊚ true ⊚ false
257) In terms of liquidity, assets like land or buildings are more liquid than a firm’s inventory or accounts receivable. ⊚ true ⊚ false
258)
The income statement computes net income by subtracting liabilities from assets. ⊚ true ⊚ false
259) Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources. ⊚ true ⊚ false
260) When an accountant writes off the cost of a tangible asset over its estimated lifetime, it is called depreciation.
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true false
261) Although a firm may use different inventory valuation methods, generally accepted accounting principles (GAAP) states that these methods must produce the same dollar value for the cost of goods sold. ⊚ true ⊚ false
262) Banks are likely to request a firm's balance sheet when determining whether to loan money to the firm. However, banks would have little interest in the firm's income statement since it covers a short period of time. ⊚ true ⊚ false
263) Cash flow problems tend to be less of an issue for small and seasonal businesses than they are for large companies. ⊚ true ⊚ false
264)
Cash flow difficulties are unlikely for a firm that is profitable. ⊚ true ⊚ false
265) FIFO and LIFO are two common methods used to compute the depreciation of tangible assets. ⊚ true ⊚ false
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266) FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows. ⊚ true ⊚ false
267) FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first. ⊚ true ⊚ false
268) first.
The LIFO method of inventory valuation assumes the newest items in inventory are sold ⊚ ⊚
true false
269) According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory. ⊚ true ⊚ false
270) When valuing items in inventory for financial reporting purposes, generally accepted accounting principles (GAAP) requires firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold first. ⊚ true ⊚ false
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271) If prices of inventory are unchanged throughout the year, LIFO and FIFO inventory valuation methods will produce the same reported net income. ⊚ true ⊚ false
272) The inventory valuation method used by a firm can make a difference in the firm’s profit margin. ⊚ true ⊚ false
273) In businesses that handle a lot of perishable items (such as supermarkets) the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique. ⊚ true ⊚ false
274) If the economy began experiencing a prolonged period of deflation in which the prices of most goods are falling, many firms would find that the LIFO method of inventory valuation would result in higher reported profits. ⊚ true ⊚ false
275) During periods of rising prices, firms that want to report more attractive profits would tend to favor the FIFO technique of inventory valuation. ⊚ true ⊚ false
276) A firm’s balance sheet shows what the business owns, minus what the business owes, which equals the book value (or net worth) of the business.
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true false
277) Jack owns a landscaping business. The equipment he uses in his business—mowers, trimmers, and backhoes—represent his owners’ equity. ⊚ true ⊚ false
278) A corporate chain of jewelry stores finds itself with accumulated earnings at the end of the year. The corporation elects to reinvest the earnings back into the business rather than pay it out to its stockholders. This distribution is known as a company dividend. ⊚ true ⊚ false
279) Trine Manufacturing has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet. This payment will be due to the supplier in less than a year. ⊚ true ⊚ false
280) Stark Fitness wants to know the value of its owners' equity. It will total its assets and subtract its liabilities. ⊚ true ⊚ false
281) The Raleigh Company balance sheet shows the following items: accounts payable totaling $60,000; salaries payable totaling $85,000; and notes payable totaling $120,000. These are liabilities, or money that the firm owes others. ⊚ true ⊚ false
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282) The bottom line of Dannelly Steel Corporation’s income statement is equal to the net worth of the firm. ⊚ true ⊚ false
283) The Taco Hut will refer to its income statements to determine whether it was profitable, or whether it lost money over the past year. ⊚ true ⊚ false
284) Earth Excavators has several trucks that are used in the business. Recently, the owners were told that even though the government permits the firm to depreciate the vehicles, it is not a deductible expense on the income statement. ⊚ true ⊚ false
285) Miller, Inc. owns land worth $800,000 and has $180,000 worth of cash in its bank account. In the asset section of the balance sheet, Miller lists its land holdings prior to listing its cash since it is a higher value. ⊚ true ⊚ false
286) Calvin borrowed money from a friend to acquire a liquor license for his new pub and gave him a written promise to repay the amount within six months. Calvin should list this business debt as an operating expense on his pub's balance sheet. ⊚ true ⊚ false
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287) Seaside Swim Sports established a line of credit with its local bank and used (borrowed) $95,000 against it to purchase its first year's inventory. Since it is required to repay the money before the end of its fiscal year, the company's accountant lists this liability with the current liabilities on the balance sheet. ⊚ true ⊚ false
288) At this point in time, Seaside Swim Sports' balance sheet shows $100,000 in assets and $90,000 in liabilities. The company's accounting system will show the owners' equity as $190,000. ⊚ true ⊚ false
289) Rhea is taking her first course in accounting this semester. One of the first things she learns is that revenue and net income mean the same thing. ⊚ true ⊚ false
290) Seaside Swim Sports’ owner is concerned with how his business decisions affect the bottom line. This is another way of saying that he is concerned with the impact of his decisions on net income after taxes. ⊚ true ⊚ false
291) Money received from tickets sold for a Kayne West concert is recorded as net income on the concert promoter's income statement. ⊚ true ⊚ false
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292) A potential investor would be interested in both the balance sheet and income statement when evaluating whether or not to invest in a company. ⊚ true ⊚ false
293) A hospital emergency room serves several patients from a ten-car pile-up on the local interstate. Most of the victims require bandages, antibiotics, foot and arm casts, topical ointments, and pain pills. These items are part of the costs of goods sold for the hospital emergency room. ⊚ true ⊚ false
294) Business is booming for Pet Care To Go, a mobile veterinary care clinic. Each week it orders more vaccines, antibiotics, and preventive care supplies from a major veterinary supplier, with the understanding that it will pay for these supplies in one month's time. Most of the company's clients are elderly and on fixed incomes, and often do not pay for services for two or more months. This is not a problem because as long as the company continues to book appointments, it will create profits and growth. ⊚ true ⊚ false
295) Cash revenues from the sale of new cars at Al’s Autos would be listed as a cash inflow from operations on Al’s statement of cash flows. ⊚ true ⊚ false
296) A loan officer at a bank is considering a loan application from Clara’s Boutique. He is concerned about the company's ability to make payments on the loan. The loan officer is likely to be interested in Clara’s statement of cash flows.
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true false
297) Regional Medical Clinic, successfully took out a bank loan for $155,000. It used $90,000 of this loan to pay off an existing loan that had a higher interest rate and purchased X-ray equipment with the remaining funds. These events were noted as financing and investing activities on its balance sheet. ⊚ true ⊚ false
298) Financial ratios are used to analyze a firm's financial condition and financial performance. ⊚ true ⊚ false
299) Liquidity ratios are of particular importance to stockholders but have little relevance for creditors. ⊚ true ⊚ false
300) The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations. ⊚ true ⊚ false
301)
Liquidity refers to how fast an asset can be converted to cash. ⊚ true ⊚ false
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302)
The current ratio is used to evaluate a firm's ability to pay its short-term debts. ⊚ true ⊚ false
303)
The current ratio is found by dividing the firm's total assets by its total liabilities. ⊚ true ⊚ false
304) The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations. ⊚ true ⊚ false
305)
Both the current ratio and the acid-test ratio are liquidity ratios. ⊚ true ⊚ false
306)
The acid-test ratio is found by dividing inventory by cost of goods sold. ⊚ true ⊚ false
307) For firms that sometimes have difficulty selling their inventory, the current ratio is likely to be a better measure of liquidity than the acid-test ratio. ⊚ true ⊚ false
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308) A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders. ⊚ true ⊚ false
309) Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations. ⊚ true ⊚ false
310)
The debt to owners' equity ratio is a common type of liquidity ratio. ⊚ true ⊚ false
311)
Profitability ratios are often used to measure management's earnings performance. ⊚ true ⊚ false
312) A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners. ⊚ true ⊚ false
313)
The return on sales ratio measures a firm's use of leverage. ⊚ true ⊚ false
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314) The basic earnings per share ratio does not take stock options, warrants, and preferred stock into account. ⊚ true ⊚ false
315) Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits. ⊚ true ⊚ false
316) The inventory turnover ratio measures the speed of inventory moving through the firm and its conversion into sales. ⊚ true ⊚ false
317) A lower-than average inventory turnover ratio often indicates obsolete merchandise on hand or poor buying practices. ⊚ true ⊚ false
318)
The acid-test ratio emphasizes the ability to convert inventory quickly into cash. ⊚ true ⊚ false
319)
The inventory turnover ratio for all firms should be greater than two times. ⊚ true ⊚ false
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320) One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry. ⊚ true ⊚ false
321) The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds. ⊚ true ⊚ false
322) A lower than average inventory turnover ratio indicates excellent inventory management practices. ⊚ true ⊚ false
323) A debt to owners' equity ratio of 25percent indicates that a firm has more debt than equity. ⊚ true ⊚ false
324) A medical supply company has recorded the following on its income statement for the period ending December 31, 2021:
Net Income Net Sales
$ $
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85,000 250,000
The return on sales = 34 percent. This return is outstanding and there is no need to compare this return to competitors in the medical supply industry. ⊚ true ⊚ false
325) A firm’s accountant has recorded the following: Total Current Assets = $60,000, including Cash = $24,000; Accounts Receivable = $20,000; and Inventory = $16,000. Total Assets = $230,000; Total Current Liabilities = $48,000; and Total Current and Long-Term Liabilities = $98,000. The store's Current Ratio = 1.25. The store's Acid-Test Ratio = .92 ⊚ true ⊚ false
326) There are five key working areas in accounting: financial accounting, managerial accounting, auditing, tax accounting, and governmental and not-for-profit accounting. ⊚ true ⊚ false
327)
The accounting profession is divided into two main fields: bookkeeping and auditing. ⊚ true ⊚ false
328)
Budget preparation is one aspect of managerial accounting. ⊚ true ⊚ false
329) Managerial accounting provides information for people outside of the organization to make investment decisions. ⊚ true ⊚ false
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330) Activities of managerial accountants include measuring and reporting the costs of production, marketing, and other functions within the organization. ⊚ true ⊚ false
331) Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization. ⊚ true ⊚ false
332) Financial accounting involves activities such as preparing budgets and measuring production costs. ⊚ true ⊚ false
333) Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision making. ⊚ true ⊚ false
334) Financial accountants prepare reports for owners, creditors, suppliers, and others outside of the organization. ⊚ true ⊚ false
335) A firm's annual report is a yearly statement of the financial condition, progress, and expectations of an organization.
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⊚ ⊚
true false
336) An individual who provides accounting services to individuals and businesses on a fee basis is referred to as a private accountant. ⊚ true ⊚ false
337) The job of reviewing and evaluating the information used to prepare a company's financial statements is referred to as auditing. ⊚ true ⊚ false
338) Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed. ⊚ true ⊚ false
339) An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements. ⊚ true ⊚ false
340)
A tax accountant is responsible for preparing tax returns and developing tax strategies. ⊚ true ⊚ false
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341) The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting. ⊚ true ⊚ false
342) Taxpayers and special interest groups often have interest in the information generated by government accounting. ⊚ true ⊚ false
343) As a certified public accountant, you would be required to pass a series of examinations established by the AICPA. ⊚ true ⊚ false
344) Information contained in a firm's annual report largely represents work done by managerial accountants. ⊚ true ⊚ false
345) A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny. ⊚ true ⊚ false
346) Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants. ⊚ true ⊚ false
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347) Recent accounting scandals raised serious questions about the legitimacy of an accounting firm performing both auditing and consulting work for the same company. ⊚ true ⊚ false
348) In large companies, certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses. ⊚ true ⊚ false
349) As the burden of taxes grows, the role of the auditor becomes increasingly important to the organization. ⊚ true ⊚ false
350) The Sarbanes-Oxley Act strengthens the protection for whistleblowers who report wrongful actions of company officers. ⊚ true ⊚ false
351) The Sarbanes-Oxley Act prohibits accounting firms from providing certain non-auditing work (such as consulting services) to companies they audit. ⊚ true ⊚ false
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352) According to the “Adapting to Change” box, the SEC is determined to crack down on and punish those accused of fraud. However, so many auditors and CPAs are trained in how to search for fraud that there are too many cases to prosecute. ⊚ true ⊚ false
353) As mentioned in the “Adapting to Change” box, accountants that search for fraudulent activities are called forensic accountants. ⊚ true ⊚ false
354) As a certified public accountant (CPA), Lacey might become involved in helping her clients select appropriate accounting computer software for their firm. ⊚ true ⊚ false
355) Mikhail is an accountant employed full time by the BuiltRite Company. Mikhail is an example of a public accountant. ⊚ true ⊚ false
356) Chen holds a bachelor's degree in accounting and additional training in tax law. He is responsible for preparing tax returns and developing tax strategies for his employer and has done so for the past seven years. Chen is a certified government accountant. ⊚ true ⊚ false
357) Comprehensive Insurance Corporation's internal accountants can prepare an audit for the company.
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⊚ ⊚
true false
358) Rashon is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending. The type of accounting information Rashon and his group will follow most closely is provided by certified public accountants. ⊚ true ⊚ false
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Answer Key Test name: chapter 17 11) B 12) C 13) A 14) A 15) D 16) A 17) C 18) C 19) A 20) A 21) D 22) C 23) B 24) D 25) B 26) B 27) A 28) C 29) A 30) C 31) D 32) C 33) A 34) D 35) C 36) B
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37) A 38) D 39) B 40) A 41) C 42) B 43) C 44) A 45) A 46) C 47) D 48) D 49) C 50) C 51) B 52) C 53) D 54) C 55) B 56) B 57) D 58) B 59) A 60) B 61) A 62) B 63) D 64) C 65) A 66) B
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67) C 68) D 69) C 70) B 71) B 72) B 73) A 74) D 75) A 76) C 77) D 78) A 79) D 80) C 81) D 82) A 83) C 84) B 85) B 86) B 87) D 88) B 89) C 90) A 91) C 92) D 93) C 94) C 95) C 96) B
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97) A 98) A 99) B 100) A 101) B 102) D 103) A 104) C 105) D 106) A 107) B 108) A 109) B 110) B 111) B 112) D 113) C 114) D 115) A 116) B 117) B 118) D 119) B 120) C 121) A 122) A 123) D 124) A 125) B 126) A
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127) C 128) B 129) A 130) C 131) A 132) B 133) A 134) B 135) A 136) D 137) C 138) B 139) B 140) D 141) D 142) C 143) D 144) A 145) B 146) D 147) C 148) A 149) B 150) B 151) C 152) B 153) A 154) D 155) C 156) A
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157) D 158) C 159) C 160) B 161) A 162) B 163) D 164) A 165) C 166) A 167) D 168) B 169) B 170) C 171) D 172) Section Break 172.1) B 172.2) C 172.3) A 172.4) C 172.5) D 173) TRUE 174) FALSE 175) TRUE 176) FALSE 177) TRUE 178) FALSE 179) FALSE 180) TRUE 181) TRUE
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182) FALSE 183) FALSE 184) TRUE 185) TRUE 186) FALSE 187) TRUE 188) TRUE 189) TRUE 190) FALSE 191) FALSE 192) FALSE 193) TRUE 194) FALSE 195) FALSE 196) FALSE 197) FALSE 198) TRUE 199) FALSE 200) FALSE 201) FALSE 202) TRUE 203) FALSE 204) TRUE 205) FALSE 206) TRUE 207) FALSE 208) TRUE 209) TRUE 210) FALSE 211) TRUE
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212) FALSE 213) TRUE 214) TRUE 215) FALSE 216) TRUE 217) TRUE 218) FALSE 219) FALSE 220) FALSE 221) FALSE 222) TRUE 223) FALSE 224) TRUE 225) FALSE 226) FALSE 227) TRUE 228) FALSE 229) FALSE 230) FALSE 231) FALSE 232) TRUE 233) FALSE 234) TRUE 235) TRUE 236) TRUE 237) FALSE 238) TRUE 239) FALSE 240) TRUE 241) TRUE
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242) FALSE 243) FALSE 244) TRUE 245) TRUE 246) FALSE 247) TRUE 248) TRUE 249) FALSE 250) TRUE 251) TRUE 252) FALSE 253) TRUE 254) FALSE 255) FALSE 256) TRUE 257) FALSE 258) FALSE 259) TRUE 260) TRUE 261) FALSE 262) FALSE 263) FALSE 264) FALSE 265) FALSE 266) FALSE 267) FALSE 268) TRUE 269) FALSE 270) FALSE 271) TRUE
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272) TRUE 273) FALSE 274) TRUE 275) TRUE 276) TRUE 277) FALSE 278) FALSE 279) TRUE 280) TRUE 281) TRUE 282) FALSE 283) TRUE 284) FALSE 285) FALSE 286) FALSE 287) TRUE 288) FALSE 289) FALSE 290) TRUE 291) FALSE 292) TRUE 293) TRUE 294) FALSE 295) TRUE 296) TRUE 297) FALSE 298) TRUE 299) FALSE 300) FALSE 301) TRUE
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302) TRUE 303) FALSE 304) FALSE 305) TRUE 306) FALSE 307) FALSE 308) TRUE 309) TRUE 310) FALSE 311) TRUE 312) FALSE 313) FALSE 314) TRUE 315) TRUE 316) TRUE 317) TRUE 318) TRUE 319) FALSE 320) TRUE 321) TRUE 322) FALSE 323) FALSE 324) FALSE 325) TRUE 326) TRUE 327) FALSE 328) TRUE 329) FALSE 330) TRUE 331) FALSE
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332) FALSE 333) FALSE 334) TRUE 335) TRUE 336) FALSE 337) TRUE 338) FALSE 339) TRUE 340) TRUE 341) FALSE 342) TRUE 343) TRUE 344) FALSE 345) TRUE 346) TRUE 347) TRUE 348) FALSE 349) FALSE 350) TRUE 351) TRUE 352) FALSE 353) TRUE 354) TRUE 355) FALSE 356) FALSE 357) TRUE 358) FALSE
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Student name:__________ 1) What is financial management? Identify the duties and responsibilities of financial managers.
2)
Identify and describe the major steps involved in financial planning.
3) Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.
4)
Identify and describe three types of short-term financing.
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5)
What is equity financing? Identify and describe the major sources of equity financing.
6) What are two major forms of debt financing? Describe and differentiate between the two types.
7)
Explain the term leverage. When is it more favorable for firms to use this strategy?
8) __________ examine the data prepared by __________ and then make recommendations to top management regarding strategies for improving the firm. A) Accountants; financial managers B) Accountants; bankers C) Financial managers; accountants D) Financial managers; bankers
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9) __________ is the function in business that is responsible for acquiring funds for the firm and managing funds within the firm. A) Accounting B) Managerial accounting C) Finance D) Financial accounting
10)
What are the areas of authority and responsibility for a chief financial officer (CFO)? A) accounting and finance B) marketing and finance C) production and accounting D) finance and research and development
11)
No matter the size of the business, finance is a critical activity for A) profit-seeking, but not for nonprofit organizations. B) profit-seeking and nonprofit organizations. C) nonprofit organizations, but not for profit-seeking businesses. D) accountants, but not for financial managers.
12)
Undercapitalization refers to the problem of A) insufficient start-up funds. B) inadequate control of expenses. C) inappropriate cash flows. D) undervalued capital stock.
13)
Which statement is most accurate?
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A) Accounting and finance are not related. B) Financial managers keep the books for a firm. C) Financial managers need to understand accounting. D) Nonprofit organizations need accounting but not finance.
14)
What is a primary area of concern for financial managers? A) undercapitalization B) inability to recruit qualified workers C) poor advertising messages D) inadequate market control
15)
Which business function involves credit management/collecting funds from customers? A) accounting B) production C) marketing D) finance
16)
Which statement about taxes is accurate? A) Taxes represent the greatest inflow of cash to the firm. B) Profitable businesses usually pay taxes. C) Tax management falls within the responsibility of marketing managers. D) Taxes cannot be managed because of fluctuations in political policy.
17) A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles.
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A) managerial accountant B) tax accountant C) bookkeeper D) internal auditor
18)
The financial failure of a firm is often due to A) overcapitalization. B) undercapitalization. C) tight control of expenses. D) precise management of cash flows.
19) A(n) __________ job includes forecasting, budgeting, cash flow analysis, cost control, taxes, and credit management. A) CPA's B) investment banker's C) financial manager's D) portfolio manager's
20)
Which company is undercapitalized?
A) A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries. B) A new company struggling because it has insufficient start-up funds. C) A medium-sized company that has decided to buy out a smaller competitor. D) An electric utility that has recently experienced a significant increase in the cost of coal and labor.
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21)
Which activity is most likely to be performed by a financial manager? A) design of a marketable product that satisfies an unmet need B) identification of specific target markets for a firm's goods C) preparation of the balance sheet and income statement for the firm D) analysis of the tax implications of various managerial decisions
22) Juanita started a cake decorating business last year. Unfortunately, it failed quickly. She is convinced that she lacked the necessary funds to promote her business and get it off the ground. What did Juanita experience? A) inadequate financial control B) undervalued inventory C) undercapitalization D) a cash flow issue
23) Eduardo is the manager of Hometown Hardware. During the past six months, his cash expenditures have exceeded his cash receipts. Hometown Hardware is suffering from a(n) __________ problem. A) accounting B) undercapitalization C) cash flow D) exchange rate
24) Raynah, a new graduate with a finance degree, was recently hired by a large corporation to work in tax management. Raynah’s job is to A) prepare the company's financial statements. B) develop ways to increase taxes in order to enhance the bottom line. C) minimize the firm's tax consequences. D) be the firm's tax collector.
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25) Ian is going to major in business. However, he has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. What should Ian do? A) Avoid finance courses and focus on subjects that he enjoys. B) Take a finance course to satisfy graduation requirements. C) Realize that his success in business requires an understanding of financial issues. D) Not bother taking finance courses; they are only helpful if you plan to get a job with a bank.
26) When Pet Medic, a mobile veterinary company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to A) manage accounts receivable. B) manage accounts payable. C) develop tax strategies. D) audit the company ledgers.
27)
The overall objective of financial planning is to A) forecast the impact of technological trends. B) prepare financial statements for managers. C) optimize the firm's profitability. D) establish budgets for financial control.
28)
The first step in the financial planning process is
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A) forecasting financial needs. B) preparing financial statements. C) developing budgets. D) establishing financial control.
29) A __________ forecast predicts the revenues, costs, and expenses a firm will incur for a period of one year or less. A) near-horizon B) short-term C) capital expenditures D) tactical
30)
A __________ forecast predicts the future cash inflows and outflows in future periods. A) money based B) short-term C) cash flow D) long-term
31) A __________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year. A) cash flow B) short-term C) capital expenditures D) long-term
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32) In order to assist in revenue realization, a(n) __________ allocates resources throughout the firm. A) forecast B) balance sheet C) budget D) income statement
33) Which type of budget shows a firm's spending plans on fixed assets such as large equipment? A) capital budget B) operating budget C) cash budget D) surplus budget
34) The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period, is called the __________ budget. A) capital B) operating C) cash D) monetary
35) __________ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses. A) Factor analysis B) Forecasting C) Financial planning D) Financial control
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36)
An effective budget requires A) the use of a skilled accountant. B) accurate forecasts. C) management approval. D) stakeholder consensus.
37) If a company wants to predict how much money it can make this coming year, it will benefit from developing a A) master budget. B) consolidated income statement. C) short-term forecast. D) statement of cash flows.
38) Which type of forecast would be most helpful for a company looking to know the income potential during the next five years? A) cash flow forecast B) long-term forecast C) short-term forecast D) capital budget forecast
39) Epic Financial Services is contemplating purchasing and installing a new, expensive computer network. This is the type of expenditure that would be included in a(n) __________ budget.
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A) capital B) cash C) operating D) asset
40) The managers of Urban Threads, a retail clothing store, regularly compare actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. This is an example of financial A) accounting. B) control. C) planning. D) budgeting.
41) Maloof, a management consultant, knows that regardless of how good his firm's product might be, the business has little chance of success without a(n) A) financial plan. B) outside consultant. C) auditor. D) warranty.
42) Kendra realizes the importance of developing a __________ for her interior design business. Kendra understands the importance of appropriately allocating resources in order to achieve the goals of her firm. A) market prediction B) financial forecast C) budget D) cash flow analysis
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43) As a finance manager for a sporting goods store, Ritesh worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating the company's cash disbursements and short-term investment expectations. Facing these concerns, a(n) __________ would provide Ritesh with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing. A) operating budget B) cash budget C) capital budget D) line item budget
44) A finance manager has asked his assistant, Viktor, to prepare the __________ budget. Viktor will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities. A) master B) cash C) capital D) line item
45)
One of the challenges of effective financial management is
A) having sufficient cash on hand without compromising the firm's investment potential. B) ensuring the satisfaction of each of the stakeholder groups. C) working within the strict regulations of the Financial Accounting Standards Board (FASB). D) providing the financial data in a timely manner for management consultants to improve decision making.
46)
The concept time value of money indicates
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A) the value of a dollar decreases over time as prices increase. B) the prices of goods and services will fluctuate over time due to inflation and higher costs of production. C) monetary systems tend to become more sophisticated over time. D) a dollar received today is worth more than a dollar received a year from today.
47)
Money has a time value because A) inflation increases the value of money over time. B) money earns interest over time. C) monetary systems are more automated than in the past. D) money holds its value regardless of the passage of time.
48)
The rationale behind offering customers credit is
A) permitting customers to pay with credit cards or on credit makes it easier for them to buy, and it also attracts new customers. B) offering customers credit helps with the firm's cash flow position. C) offering customers credit helps match revenues with expenses for the same time period. D) permitting customers to pay with credit cards or on credit forces a company to rely less on accounts receivables and more on accounts payables.
49)
A major concern for firms selling on credit is A) the realization that many credit customers always pay their bills. B) the large amount of assets tied up in accounts receivable. C) the resulting increase in the debt ratio for the firm. D) the inability to utilize factoring as a source of financing.
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50)
To reduce the time and expense of collecting their accounts receivable, some firms A) extend credit to new customers. B) offer extended payment plans to existing customers. C) adopt a just-in-time inventory policy. D) accept bank credit cards.
51)
Acquiring funds through borrowing represents A) debt financing. B) venture capital. C) speculative capital. D) equity financing.
52)
If a firm sells shares of stock, it is financing with A) debt. B) liabilities. C) spectator capital. D) equity.
53)
If a company secures a three-year bank loan, this is considered A) short-term financing. B) asset funding. C) liability funding. D) long-term financing.
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54)
If a company secures a one-year bank loan this is considered A) short-term financing. B) asset funding. C) liability funding. D) long-term financing.
55)
The effective management of accounts receivable requires financial managers to A) review the credit history of new customers. B) provide prompt cash payments to suppliers. C) allow customers more time in paying their past due accounts. D) refuse bank-issued credit cards.
56)
Which situation would normally involve long-term financing? A) paying workers' salaries B) funding unanticipated emergencies C) purchasing production equipment D) expanding current inventory
57)
An effective technique to improve cash management would be to A) speed up cash payments and slow down cash collections. B) speed up cash collections and slow down cash payments. C) speed up both collections and payments of cash. D) slow down both the payment and collections of cash.
58)
What represents a capital expenditure?
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A) issuing paychecks to workers B) paying for advertising on a local radio station C) purchasing raw materials to be used in the production of a firm's product D) purchasing a building to be used for office space
59)
Which statement represents good advice prior to making capital expenditures?
A) Capital expenditures represent borrowed funds that must be repaid in one year or less. It is important to seek the advice of your accountant prior to committing. B) Capital expenditures represent investment in inventories and expendable assets that the firm will use in one year or less. It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures. C) Most firms do not value capital expenditures on their balance sheets, so it is important to stay abreast of the market value of these assets at all times, in case you want to sell them. D) Capital expenditures are major investments, meaning they require large sums of funds. Companies should weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time.
60) The “Making Ethical Decisions” box "Patient Ordering or Sacrificing Patients" has an important message for managers who make financial decisions. Which statement summarizes this message? A) A carefully planned and managed inventory control system helps with a firm’s efficient management of cash flow. B) A just-in-time inventory control system increases the costs of managing inventory. C) Because inventory can be counted as a depreciation expense, keeping a large amount of inventory on hand actually reduces the firm’s costs. D) The cash that a firm has tied up in inventory does not affect its day-to-day operations since inventory must be paid for before it is delivered.
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61) Majestic Theaters has plans to build a new $30 million movie theater and intends to finance this project through the sale of additional shares of ownership in their firm. Selling new shares of stock represents __________ financing. A) retained B) debt C) initial offering D) equity
62) The owners of Kurt’s Kayak Shop worry that cash flow this winter may be insufficient to meet the current operating expenses. While they anticipate a surplus of cash inflow as warm weather approaches, they need funds now to meet the company's immediate obligations. The owners can best resolve cash flow concerns by obtaining __________ financing. A) intermediate B) contingency C) short-term D) long-term
63) If a firm wants to improve its cash flow, what strategy would most likely achieve this objective? A) relaxing its credit policy for new customers B) offering cash discounts to buyers who pay their accounts promptly C) accepting IOUs from customers who buy in large quantities D) offering extended payment plans to qualified buyers
64) If an airport that previously relied on metal detectors decides to invest in full body screening ports that scan the entire body to detect weapons or explosive devices that someone may want to take on board a plane, these expensive devices represent __________ assets.
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A) long-term B) short-term C) intangible D) interest-bearing
65) A plumbing supply company does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the A) time value of money. B) benefits of tax-deductible expenses. C) financial community's perception of equity financing. D) government's regulations of the plumbing industry.
66) By selling shares of ownership in their company, Langford Labs acquires the funds needed to finance their research and development projects. Langford Labs provides for their long-term funding needs through __________ financing. A) debt B) equity C) retained D) asset
67) The CFO of a satellite radio company was trying to work his magic today as he solicited another telecommunications/entertainment company to invest in his company in order to prevent bankruptcy. Having refinanced the company less than a year ago, the satellite radio finance manager had a $75 million note coming due today. The current financing arrangement represents
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A) a long-term sale of stock to private investors. B) short-term debt financing. C) the issuance of long-term bonds. D) a leveraged buyout.
68) When Salem Industries renegotiated its loan agreement, the company borrowed an additional $2 million. The new loan requires Salem Industries to repay the new amount in nine months. Salem’s activity represents __________ financing. A) equity B) debt C) factored D) secured
69)
Finance managers spend the majority of their time managing A) the accounting process. B) long-term financial needs. C) short-term financial needs. D) equity financing.
70)
What is a source of short-term funding? A) retained earnings B) commercial paper C) common stock D) corporate bonds
71)
The most widely used source of short-term funding is
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A) trade credit. B) a line of credit. C) factoring. D) the issuance of bonds.
72) __________ is a form of short-term financing. Businesses buy merchandise from their suppliers but are not required to pay for their purchases until some future date. A) Secured credit B) Trade credit C) Revolving credit D) Factoring
73) Some suppliers hesitate to offer trade credit to firms with a poor credit history. In these cases, the supplier may insist that the customer sign a(n) A) indenture agreement. B) promissory note. C) line of credit. D) factoring agreement.
74)
A loan backed by collateral represents a(n) A) bond trust. B) debenture bond. C) pledging factor. D) secured loan.
75)
Typically, only highly regarded customers with financial stability receive
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A) secured loans. B) bank premiums. C) unsecured loans. D) trade credit.
76) A firm negotiates a(n) __________ with its bank. This arrangement gives the firm access to a specified amount of unsecured short-term funds, provided the bank has the funds available. A) asset drawing account B) capital drawing agreement C) reserve account D) line of credit
77)
__________ is the least expensive and most convenient form of short-term funding. A) Trade credit B) Equity financing C) Venture capital D) Debt financing
78)
Selling accounts receivable to obtain short-term funds is called A) pledging. B) factoring. C) equity financing. D) debt financing.
79)
An unsecured loan is difficult to obtain because it
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A) does not require any collateral. B) requires a promissory note. C) has to be issued from a commercial bank. D) is subject to factoring.
80) __________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days. A) Trade credit B) A line of credit C) Factoring D) Commercial paper
81) Although best used as a last resort, many small businesses find it convenient to use __________ as a short-term source of financing. Although this form of short-term debt comes with high interest rates, it provides a quick line of credit for many firms, including start-up companies who may not be able to secure bank loans. A) factoring B) credit cards C) commercial paper D) promissory notes
82) According to the “Spotlight on Small Business” box, many small businesses rely on the use of credit cards or factoring as a source of short-term financing because
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A) factoring provides a much cheaper source of funds than bank loans. B) interest paid to a factor qualifies for a tax credit. C) small firms often find it difficult to qualify for loans from banks or the Small Business Administration. D) loans provided by factors do not require collateral.
83) Which organization would be most likely to acquire short-term funding by issuing commercial paper? A) a well-known, financially stable corporation B) a small business that is unable to qualify for loans from commercial banks C) a firm with a significant percentage of current assets held as accounts receivable D) a company that prefers equity financing to obtain short-term funds
84) Lacey’s Department Stores has fallen behind in payments to suppliers due to cash flow shortages. Some suppliers are withholding shipments to Lacey’s until they receive payments on overdue accounts. To meet their immediate needs, Lacey’s Department Stores should utilize A) vulture capital. B) long-term financing. C) contingency capital. D) short-term financing.
85)
Paul’s Pool Supplies offers customer credit terms of 2/15 net 30. This gives customers a A) 15 percent discount if they pay in two days. B) 2 percent discount if they pay in thirty days. C) 2 percent discount if they pay in fifteen days. D) 15 percent discount if they pay in thirty days.
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86) Recently, an electronics manufacturer borrowed $600,000 from a bank to secure financing for a planned expansion. The __________ loan agreement requires that the electronics manufacturer provide the title to their factory as collateral. A) recapitalization B) secured C) pledged D) minority
87) A bank agreed to extend Zeller’s Orchards $250,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a A) line of credit. B) pledge agreement. C) factoring agreement. D) trade voucher.
88)
A company offers its customers trade credit with terms 2/15 net 30. This implies that
A) customers must pay half of the invoice in 15 days and the remainder within 30 days. B) paying within 30 days will let a customer deduct 15percent off the invoice price. C) most customers will pay their bill within 2 days in order to take the maximum discount. D) customers who pay within 15 days can take a 2percent discount.
89) The financial manager of Detail Graphics negotiated a __________ with the bank that allows the company to borrow up to $75,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Detail Graphics borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available.
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A) line of credit B) factor agreement C) cash flow conversion D) renewable income option
90) Jacquard Jewelers obtains needed short-term funds by selling its accounts receivable to Speedy Financial. Speedy Financial usually pays Jacquard about 80percent of the value of the receivables. Jacquard Jewelers utilizes __________ as a means of raising short-term funds. A) trade credit B) revolving credit agreements C) factoring D) receivable draft agreements
91)
Long-term financing would normally be used to purchase A) supplies. B) inventory. C) buildings. D) highly liquid assets.
92)
Businesses match their long-term capital needs to A) the firm's debt to equity ratio. B) the ratio of long-term vs. short-term capital available. C) trade credit discounts. D) their long-term goals and objectives.
93)
Businesses acquire long-term financing from two major sources,
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A) debt financing and government funds. B) equity financing and trade credit. C) retained earnings and commercial paper. D) debt financing and equity financing.
94) When using __________ financing, the company incurs a legal obligation to repay the amount borrowed. A) debt B) equity C) retained earnings D) commitment
95) A promissory note that requires the borrower to repay the loan in specified installments is called a(n) A) repayment scheduling. B) term loan agreement. C) amortization installment. D) revolving line of credit.
96) A less-established company, or a company with a high debt to equity ratio, would be considered a riskier investment to the lender. Which principle attests to this axiom? A) credit operations principle B) cash flow principle C) risk/return trade-off D) cost-benefit analysis
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97) A __________ represents a long-term debt obligation issued by a corporation or a government. A) share of stock B) commercial note C) certificate of deposit D) bond
98)
The terms of the agreement in a bond issue are referred to as the A) articles of the issue. B) terms of indebtedness. C) bond specifications. D) indenture terms.
99)
Which of these is backed only by the reputation of the issuer? A) trade credit B) secured bonds C) debenture bonds D) long-term financing
100)
Which of these provides the buyer with collateral? A) common stock B) secured bond C) unsecured bond D) debenture bonds
101)
Through equity financing, stockholders become __________ of the firm.
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A) creditors B) employees C) suppliers D) owners
102) __________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source. A) Secured bonds B) Debentures C) Warrants D) Retained earnings
103) __________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company. A) Commercial banks B) Venture capital firms C) Federal Reserve banks D) Investment bankers
104) __________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders. A) Leverage B) Retained earnings C) Factoring D) Pledging
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105) The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called A) opportunity rate. B) retained earnings. C) cost of capital. D) acquisition cost.
106) According to the “Spotlight on Small Business” box, investors that want to pool their money together with other investors in order to help entrepreneurs finance their businesses would be part of a(n) A) factoring agreement. B) mutual fund. C) over-the-counter stock exchange. D) investment syndicate.
107)
The interest paid on __________ represents a tax-deductible business expense. A) bonds B) stock C) retained earnings D) depreciated assets
108)
Which of these is a common source of long-term financing for a corporation? A) a revolving credit agreement B) commercial paper C) a bond issue D) trade credit
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109) One of the primary factors that influences the interest rate a firm pays on long-term loans is the A) intensity of competition the firm faces with new products. B) current level of government regulations. C) general level of market interest rates. D) exchange rate of the euro to the U.S. dollar.
110)
Venture capital firms look to invest their funds in firms that A) operate in established, mature industries. B) present financial statements indicating stronger than average cash flows. C) are new with great profit potential. D) require extra funding to avoid financial difficulties.
111)
Which statement about corporate bonds is correct? A) Bonds provide equity financing. B) Issuing new bonds dilutes the existing ownership in the firm. C) Interest paid to bondholders represents a tax-deductible business expense. D) Debenture bonds require assets pledged as collateral.
112)
Successful use of financial leverage requires a firm to
A) negotiate with lenders to establish a line of credit. B) establish and operate a venture capital organization to minimize the use of equity financing. C) register with the local government commission that administers market leverage. D) earn a higher return on its investments than the interest rate it pays to acquire funds.
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113)
To maximize the benefits of using financial leverage, a firm should A) strive to minimize their cost of capital. B) avoid securing funds through long-term debt financing. C) limit their investments to projects with minimum risk levels. D) incorporate in states with relatively low tax rates.
114)
Which situation represents a successful use of financial leverage?
A) A firm issues new shares of stock and uses the proceeds from the sale to retire its outstanding debt. B) A firm borrows money at 8 percent and earns an 11 percent return on its investment of these funds. C) A firm attracts the interest of two venture capitalists and plays one against the other to gain the best deal. D) A retail firm purchases merchandise at $10 and sells it for $15.
115) As Evan considers approaching a venture capital firm to provide funding for his new mobile app, he should realize that a venture capital firm will A) offer no more than 20 percent of the funding he needs. B) charge a higher interest rate than a commercial bank. C) expect the company to provide a steady dividend income. D) probably want an ownership interest in the business.
116) By purchasing stock in Care Pharmaceuticals, Madison has become a(n) __________ the company.
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A) creditor of B) owner of C) general partner in D) venture capitalist in
117) After earning $50 million in net income, Monroe Millwork distributed $15 million in dividends to its stockholders. Monroe’s board of directors decided to invest the remaining $35 million back into the business. This $35 million reinvestment of profits represents A) a trust fund. B) retained earnings. C) preferred capital. D) mutual funds.
118) After enjoying increased sales of and profits from several popular products, Slone & Sidon plans to expand its production facilities. The firm prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs. What type of financing will best meet the needs of Slone & Sidon? A) venture capital B) debenture bonds C) common stock D) retained earnings
119) Tangy Taco Restaurants announced it plans to issue $300 million in debenture bonds to fund the expansion of its fast-food chain of restaurants. In financial terms, this means the corporation will
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A) borrow $300 million worth of long-term financing; the bond issue will not carry any collateral. B) issue $300 million worth of equity financing; the bond issue will be backed by the property and buildings purchased with the funds. C) borrow $300 million worth of long-term financing; the issue will be backed by the property and buildings purchased with the funds. D) issue $300 million worth of interest-free bonds; financiers will be paid from the revenues created by the individual franchises.
120) Gro-More Industries invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs a large amount of funding—fast! The handful of seed scientists that own the company decide to offer shares of stock to general investors. This firsttime offering is a(n) A) Stock Equity Commission (SEC). B) Stock Fund Offering (SFO). C) Broad-Based Offering (BBO). D) Initial Public Offering (IPO).
121) Gro-More Industries invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company needs serious funding. The handful of seed scientists that own the company are seeking __________ but understand that they will relinquish a sizeable share of ownership in order to obtain the funds. A) debenture capital B) international line of credit C) leverage D) venture capital
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122) Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral."
122.1) Mort Tishian feels it is necessary to predict revenues, costs, and expenses on a six-month basis. "It's the only way you get an idea of what to expect," explains Mort. In order to obtain these predictions, Mort needs to develop a(n) A) cash-basis accounting system. B) short-term forecast. C) capital budget. D) econometric model.
122.2) Mort is seriously considering a major expansion in the size of his funeral home. The money spent on this type of project would be classified as a(n) A) capital expenditure. B) equity expenditure. C) off-budget expense. D) depreciation charge.
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122.3) To raise the funds for the major improvements needed at the funeral home, Mort has talked to two investors about incorporating his business and selling them shares of stock in the company. Mort is considering the use of A) debt financing. B) commercial paper. C) equity financing. D) revolving credit.
122.4) Mort approached the chief lending officer at First Virginia Bank about obtaining a $75,000 loan. The banker said she would approve the loan provided that the funeral home's building was pledged as collateral. The banker was offering a(n) A) trade credit agreement. B) institutional loan. C) secured loan. D) revolving credit agreement.
122.5) After much searching, Mort located an old banking friend of his father's. The banker offered Mort up to $25,000 in unsecured funds, which Mort's firm could borrow any time within a year, as long as the bank has the money available. Mort was offered a(n) A) revolving credit agreement. B) asset guarantee pledge. C) pledging agreement. D) line of credit.
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122.6) After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" a(n) __________ firm decided the aging population was a good investment. Although they typically look at start-ups with great promise, they approached Mort with $6 million dollars for his new idea of a major three-city expansion that included six new funeral homes, a crematory, and mausoleum. After researching the offer, Mort agreed to give up 50 percent ownership of the business in order to secure these funds. His last thoughts as he began to sign the papers were: "Now, I'll be able to compete with the big guys!" A) retained earnings B) indentured C) venture capital D) leveraged buyout
123) Finance is the function in a business that acquires funds for the firm and manages those funds within the firm. ⊚ true ⊚ false
124) Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting. ⊚ true ⊚ false
125) A financial manager makes recommendations to top executives regarding strategies for improving the financial strength of a firm. ⊚ true ⊚ false
126) The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.
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⊚ ⊚
true false
127) Accountants use data prepared by financial managers to develop strategies for improving the financial performance of the firm. ⊚ true ⊚ false
128) There is actually a stronger relationship between finance and marketing than there is between finance and accounting. ⊚ true ⊚ false
129) Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company. ⊚ true ⊚ false
130)
Financial management is more important for a large firm than it is for a small firm. ⊚ true ⊚ false
131)
The chief financial officer (CFO) is responsible for accounting and financial functions. ⊚ true ⊚ false
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132) The chief financial officer of a company is responsible for managing cash, accounts receivable, and inventory. ⊚ true ⊚ false
133) While finance is a critical activity for profit-seeking organizations, by definition nonprofit organizations are not required to fulfill the finance function. ⊚ true ⊚ false
134)
A comptroller is responsible for the acquiring and managing of funds for an organization. ⊚ true ⊚ false
135) Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially. ⊚ true ⊚ false
136)
Financial managers are responsible for controlling cash flows. ⊚ true ⊚ false
137)
Undercapitalization refers to the problem of insufficient start-up funds. ⊚ true ⊚ false
138)
Investors and entrepreneurs should have an understanding of financial issues.
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⊚ ⊚
true false
139) Financial managers are responsible for budgeting, auditing, and advising top management on financial matters. ⊚ true ⊚ false
140) One of the most common ways for a firm to fail financially is poor control over cash flow. ⊚ true ⊚ false
141) Inadequate control of expenses represents a common financial problem that contributes to business failure. ⊚ true ⊚ false
142)
A comptroller is the chief accounting officer of an organization. ⊚ true ⊚ false
143) Tax payments are important to the finance manager because they represent a cash inflow to a firm. ⊚ true ⊚ false
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144) An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers. ⊚ true ⊚ false
145) Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable. ⊚ true ⊚ false
146)
Accountants truly represent the financial managers of a business. ⊚ true ⊚ false
147)
Inadequate expense control typically occurs as a result of undercapitalization. ⊚ true ⊚ false
148) The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows. ⊚ true ⊚ false
149) Financial managers are responsible for the management of accounts receivable and accounts payable. ⊚ true ⊚ false
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150) While financial managers must be concerned with obtaining and managing the funds of the business, they are not involved in auditing or managing the taxes of the firm. ⊚ true ⊚ false
151) Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors. ⊚ true ⊚ false
152) To be effective, an internal auditor must be critical of any improprieties or deficiencies found in the financial activities of the firm. ⊚ true ⊚ false
153) Rose, a financial manager, holds responsibilities that include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management. ⊚ true ⊚ false
154) Jaden manages credit and collections for a chain of pharmacies. He is responsible for accounts receivable and accounts payable. These activities suggest that Jaden’s job is in financial management. ⊚ true ⊚ false
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155) Peeta has always loved designing and tending to gardens, and now she's a master gardener in charge at a large botanical garden. Peeta requires her staff to pursue continuing education and, because it's an area where she is weak, she is enrolling in two courses— accounting and finance—at the local community college. This is a good plan, especially since she is the boss. ⊚ true ⊚ false
156) The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money. ⊚ true ⊚ false
157)
The first step in financial planning is to develop a budget to better control costs. ⊚ true ⊚ false
158) One step in the financial planning process is to establish financial control procedures that allow managers to monitor the organization's performance. ⊚ true ⊚ false
159)
A firm's short-term forecast helps top management in preparing a company budget. ⊚ true ⊚ false
160)
A firm's short-term financial forecast provides a projected sales estimate. ⊚ true ⊚ false
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161) The primary focus of a cash flow forecast is the firm's revenue and costs for the current operating period. ⊚ true ⊚ false
162) A firm's most recent financial statements often serve as the basis for predicting future sales, costs, and expenses. ⊚ true ⊚ false
163) plan.
The long-term financial forecast plays a crucial part in the company's long-term strategic ⊚ ⊚
true false
164) The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions. ⊚ true ⊚ false
165) A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm. ⊚ true ⊚ false
166)
Financial forecasts are prepared from information contained in the company’s budgets.
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⊚ ⊚
true false
167)
To be effective, budgets are prepared independently of organizational forecasts. ⊚ true ⊚ false
168)
A capital budget highlights the expected funds provided by owner investments. ⊚ true ⊚ false
169) An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money. ⊚ true ⊚ false
170) A capital budget highlights a firm's spending plans for major assets, such as property, buildings, and equipment. ⊚ true ⊚ false
171) A capital budget combines all of a firm’s budgets into one detailed plan for monitoring the operations of the firm. ⊚ true ⊚ false
172) The operating (master) budget estimates the costs and expenses needed to run the business, given all projected revenues.
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⊚ ⊚
true false
173) A cash budget helps managers anticipate borrowing, debt repayment, operating expenses, and short-term investment opportunities. ⊚ true ⊚ false
174) The main objective of financial control is to establish priorities for the purchase of plant and equipment. ⊚ true ⊚ false
175) By identifying variances from the financial plan, managers can focus on those departments that require corrective action. ⊚ true ⊚ false
176) Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs. ⊚ true ⊚ false
177) Since short-term financial forecasts predict expected future events, they should not be influenced by recent financial statements. ⊚ true ⊚ false
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178) A budget's primary purpose is to provide managers with a financial summary of past operations. ⊚ true ⊚ false
179) Forecasting means determining how closely the actual revenue and expense results matched up with the predicted revenues and expenses. ⊚ true ⊚ false
180)
Budgets assist managers in performing the functions of planning and control. ⊚ true ⊚ false
181)
A company's capital budget helps management plan for cash shortages or surpluses. ⊚ true ⊚ false
182) Groom-on-the-Go, a mobile pet grooming business, plans to purchase a second mobile grooming van next year that will cost an estimated $95,000. The finance manager should include this projected purchase in the company's capital budget. ⊚ true ⊚ false
183) Garrett, a financial manager of a small firm, needs to determine how much his company will have to borrow in the coming months. He also needs to establish when the borrowed funds will be needed. The preparation of the cash budget will help. ⊚ true ⊚ false
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184) Martina is a financial manager with Epic Financial. She regularly compares actual revenues and expenses against their projected values. After identifying areas with significant deviations from planned values, she investigates to find the cause of these variances. Martina’s activities represent the steps involved in the preparation of Epic’s capital budget. ⊚ true ⊚ false
185) Pet Medic, a chain of mobile veterinary clinics, is planning for the future. The company owners have brought together the vice president of marketing and the director of information systems to talk about their expansion campaign, "We come to you!" The talks are in the preliminary stages, so there is no need to concern the finance team at this time because cash flow is currently not a problem. ⊚ true ⊚ false
186) Rocky Mountain Ski Resort owners know that the chair lifts on the north slope will need replacing in the next two years. Three months prior to replacement, they will include the expenditure in their cash budget. ⊚ true ⊚ false
187) Rocky Mountain Ski Resort’s cash budget for the month of March shows a negative amount. Since the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit. ⊚ true ⊚ false
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188) One very important responsibility of the finance department in both large and small businesses involves acquiring needed funds to operate the business. ⊚ true ⊚ false
189) Finance managers need funds for capital purchases, but seldom for the day-to-day operations. ⊚ true ⊚ false
190)
The concept of the time value of money is based on the interest-earning power of money. ⊚ true ⊚ false
191)
When a firm is owed money, the financial manager tries to collect as early as possible. ⊚ true ⊚ false
192)
Financial managers generally oppose credit sales because of the impact on cash flows. ⊚ true ⊚ false
193) Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit. ⊚ true ⊚ false
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194) With added competition, firms prefer not to offer the availability of credit sales to their customers. ⊚ true ⊚ false
195) The cost to a retailer of accepting credit cards is generally greater than the benefits provided. ⊚ true ⊚ false
196)
Acquiring and storing inventory represents a sizeable expenditure for many businesses. ⊚ true ⊚ false
197) To improve cash flow and profitability, effective managers attempt to control the firm's investment in inventory. ⊚ true ⊚ false
198) Capital expenditures are major investments in long-term assets such as property and equipment. ⊚ true ⊚ false
199) Sound financial management involves determining the most appropriate sources of funds to meet short-term and long-term needs of an organization. ⊚ true ⊚ false
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200) While firms finance their long-term needs with debt financing, their short-term needs are served by equity financing. ⊚ true ⊚ false
201)
Short-term financing refers to borrowed funds that must be repaid in a year or less. ⊚ true ⊚ false
202)
Debt financing must be repaid. ⊚ true ⊚ false
203) Equity financing represents funds acquired from within the firm or through the sale of stock, representing ownership in the company. ⊚ true ⊚ false
204) Business organizations always use long-term financing for (both) short-term and longterm needs, but they never use short-term financing for (both) short-term and long-term needs. ⊚ true ⊚ false
205) Debt financing refers to funds acquired from the profitable operations of a firm or through the sale of ownership in the firm. ⊚ true ⊚ false
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206) Expansion into new markets (either domestic or global) is sometimes financed with longterm funds. ⊚ true ⊚ false
207)
Companies raising funds must choose either debt or equity sources, but not both. ⊚ true ⊚ false
208) Financial managers understand the time value of money. They try to maximize cash expenditures, as opposed to minimizing cash expenditures. ⊚ true ⊚ false
209) Based on the time value of money, $100 received a year from today is worth more than $100 received today. ⊚ true ⊚ false
210) Money has time value because if invested, it has the potential to earn more money at some point in the future. ⊚ true ⊚ false
211) Efficient cash management requires firms to pay their bills as quickly as possible and delay the collection of accounts receivable.
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⊚ ⊚
true false
212) Successful businesses establish restrictive credit policies encouraging customers to pay cash. ⊚ true ⊚ false
213) Offering cash discounts to customers who pay their bills by a certain date represents an effective technique to manage accounts receivable. ⊚ true ⊚ false
214) An effective strategy to manage cash flows requires retail businesses to eliminate their inventory. ⊚ true ⊚ false
215) A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs. ⊚ true ⊚ false
216)
Equity financing may involve the sale of stock (representing ownership) to new investors. ⊚ true ⊚ false
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217) As financial manager for Reynold’s Manufacturing, Avantika evaluates the purchase of expensive machinery and the construction of new facilities. Avantika is analyzing capital expenditure proposals. ⊚ true ⊚ false
218) Paige’s small floral shop specializes in weddings. Though she knows her competitors allow customers to buy on credit, she is concerned about the risk and expense of unpaid customer accounts. One strategy to reduce risk and collect sales revenue more quickly would be to accept bank-issued credit cards. ⊚ true ⊚ false
219) The Chicken Shack is a chain of restaurants on the West Coast. The corporation plans to expand to the Midwest and then along the East Coast. The acquisition of land and construction of new restaurants represent major capital expenditures. ⊚ true ⊚ false
220) Pet Medic, a mobile veterinary service, wants to expand. After thoroughly reviewing the possibility of expansion, Pet Medic plans to offer a similar service in the Cleveland metropolitan area as it does in its original Cincinnati, Ohio area. This will require a large capital expenditure. Due to the nature of this project, the firm will consider only equity financing. ⊚ true ⊚ false
221) Annabelle, the owner of Read It Again Booksellers, is seeking additional financing for books that she plans to buy and sell in the same fiscal year. Even though it will be a sizeable investment in inventory, Annabelle is seeking short-term financing. ⊚ true ⊚ false
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222) Read It Again Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds. ⊚ true ⊚ false
223) Financial managers devote the majority of their time to obtaining long-term financing to fund the firm's capital expenditures. ⊚ true ⊚ false
224)
Small businesses rely heavily on long-term financing. ⊚ true ⊚ false
225) Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm. ⊚ true ⊚ false
226)
The most widely used source of short-term funding is trade credit. ⊚ true ⊚ false
227)
Trade credit represents one of the most expensive forms of short-term financing. ⊚ true ⊚ false
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228)
Trade credit is the practice of buying goods now and paying for them later. ⊚ true ⊚ false
229) The terms "2/10, net 30" indicate that the seller is offering a 20percent discount for early payment. ⊚ true ⊚ false
230) Trade credit means the seller will sell and deliver products and/or services to the buyer, with the understanding that the buyer will pay for these products and/or services at a later date. ⊚ true ⊚ false
231) Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history. ⊚ true ⊚ false
232) A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date. ⊚ true ⊚ false
233) Family and friends represent problem-free sources of financing for most small businesses.
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⊚ ⊚
true false
234)
A line of credit is designed to reduce the risk of lending money. ⊚ true ⊚ false
235)
Inventory financing represents the selling of accounts receivables as collateral for a loan. ⊚ true ⊚ false
236) A secured loan means the borrower has the security of knowing repayment is not due for several years. ⊚ true ⊚ false
237)
An unsecured loan does not require a borrower to provide collateral to secure a loan. ⊚ true ⊚ false
238) A line of credit represents a guarantee from a bank to lend a firm a given amount of money. ⊚ true ⊚ false
239) A line of credit is a given amount of unsecured short-term funds a bank will lend to a business.
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⊚ ⊚
true false
240) Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks. ⊚ true ⊚ false
241)
Factoring refers to the process of selling accounts receivable for cash. ⊚ true ⊚ false
242)
Factoring refers to the process of selling inventory to generate short-term funds. ⊚ true ⊚ false
243)
Factoring represents the least expensive way for a firm to raise short-term funds. ⊚ true ⊚ false
244) Because of their convenience, credit cards are a source of a readily available line of credit for a small business. ⊚ true ⊚ false
245)
Commercial paper is unsecured short-term debt.
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⊚ ⊚
246)
true false
Selling commercial paper is a way for financially unstable firms to raise short-term funds. ⊚ true ⊚ false
247) Many sellers offer a 2percent discount to a buyer that makes payment 20 days before the due date, (2/10, net 30). Firms that fail to take advantage of this early payment discount are needlessly increasing its costs by not doing so. ⊚ true ⊚ false
248) If a buyer is offered the terms of sale of "3/10, net 30" this means that the buyer can receive a 10 percent discount by making full payment within 30 days of the billing date. ⊚ true ⊚ false
249) A line of credit from a bank guarantees a firm that a specified amount of funds will be available when it is needed. ⊚ true ⊚ false
250) According to the box “Spotlight on Small Business,” most online loans are safe with a low interest rate. ⊚ true ⊚ false
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251) Mahalina is a financial manager for 20/20, a chain of retail stores offering optical care and glasses. The majority of Mahalina’s day likely involves efforts to locate and secure longterm financing to fund 20/20’s capital expenditures. ⊚ true ⊚ false
252) When Arturo received a loan from his local bank, he was required to pledge his house and car as collateral. The money from the loan was used to start his new business, which unfortunately failed within 6 months. The bank can now claim Arturo’s house and car to satisfy its claim. ⊚ true ⊚ false
253) As the owner of a small bakery, Callie is in need of funds to purchase additional ovens and a delivery van for her business. Since she needs to finance these items for a long period of time, her best choice would be to secure commercial paper to purchase the items. ⊚ true ⊚ false
254) Cavern Construction relies on factoring to meet its short-term financing needs. This means that Cavern borrows money from a finance company and pledges its accounts receivable as collateral. ⊚ true ⊚ false
255) Dillard Manufacturing holds commercial paper issued by Midway Investments that matures in 180 days. However, shortly after Dillard purchased the commercial paper, Midway went out of business. The finance manager for Dillard is not worried because his loan to the corporation is secured by collateral that he can now claim. ⊚ true ⊚ false
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256) Most companies require long-term capital to purchase fixed assets such as plant and equipment, to develop new products and services, or to finance an expansion. ⊚ true ⊚ false
257)
Equity financing refers to the money a firm receives from the sale of bonds. ⊚ true ⊚ false
258) When using debt financing, firms incur a legal obligation to repay the amount of money invested. ⊚ true ⊚ false
259) A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period. ⊚ true ⊚ false
260)
The interest paid for debt financing is a tax-deductible expense for the firm. ⊚ true ⊚ false
261) According to the risk/return trade-off, the higher the risk, the lower the interest rate charged by the lender. ⊚ true ⊚ false
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262) A share of stock represents a company-issued IOU including a promise to repay on a certain date. ⊚ true ⊚ false
263)
A bond represents a long-term debt obligation of a corporation or government. ⊚ true ⊚ false
264)
An unsecured corporate bond is known as a debenture bond. ⊚ true ⊚ false
265)
A debenture bond is backed only by the reputation of the issuer. ⊚ true ⊚ false
266) The types of organizations which can issue bonds are privately and publicly held corporations, exclusively. ⊚ true ⊚ false
267) The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue. ⊚ true ⊚ false
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268)
Funds obtained from venture capitalists are considered equity financing. ⊚ true ⊚ false
269)
Retained earnings represent a source of equity financing. ⊚ true ⊚ false
270) The first time a company offers to sell its stock to the general public is called an initial private label (IPL). ⊚ true ⊚ false
271) Corporations must comply with the Securities and Exchange Commission (SEC) requirements in order to sell their stock publicly. ⊚ true ⊚ false
272) Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential. ⊚ true ⊚ false
273) Venture capitalists expect lower than average returns on their investment since they are exposed to little risk. ⊚ true ⊚ false
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274)
Most companies have the ready cash available to make large purchases. ⊚ true ⊚ false
275)
Acquiring funds through equity financing requires the firm to pay annual dividends. ⊚ true ⊚ false
276)
Acquiring funds through debt financing actually decreases the overall risk of the firm. ⊚ true ⊚ false
277)
Acquiring funds through debt financing enhances the firm's ability to increase profits. ⊚ true ⊚ false
278)
Leverage refers to the use of borrowed funds to increase a firm's rate of return. ⊚ true ⊚ false
279) The cost of capital is the rate of return a firm must earn in order to meet the demands of its lenders and expectations of its equity holders. ⊚ true ⊚ false
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280) A firm’s long-term goals and objectives go hand-in-hand with its long-term financing objectives. ⊚ true ⊚ false
281)
Corporations that issue debenture bonds are required to provide collateral. ⊚ true ⊚ false
282) Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed. ⊚ true ⊚ false
283)
Unlike bonds, stocks offer the advantage of tax-deductible interest payments. ⊚ true ⊚ false
284) One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm. ⊚ true ⊚ false
285) As mentioned in the “Spotlight on Small Business” box, AngelList is a social network that links start-up companies with venture capitalists. ⊚ true ⊚ false
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286) Edison Electric issued $300 million of bonds to finance a major upgrade of its largest power plant in Pennsylvania. The issuance of these bonds indicates that Edison Electric utilizes equity capital to meet its long-term financing needs. ⊚ true ⊚ false
287) As a financial manager at Greyson Automotive, Clive is exploring sources of long-term funds to finance the construction of Greyson’s newest plant. Clive would prefer a funding source that does not require interest payments or involve major underwriting fees. Clive will consider using retained earnings to fund the construction project. ⊚ true ⊚ false
288) Financial managers at Stalwart Steel have always had a conservative attitude toward long-term financing. In particular, they are interested in keeping risk to a minimum. This philosophy suggests that managers at Stalwart consider the extensive use of leverage an attractive financial strategy. ⊚ true ⊚ false
289) An example of a firm using leverage to its advantage is a firm that borrows funds at 9percent and invests those funds to earn 14 percent. ⊚ true ⊚ false
290) If a firm earns 10 percent return on funds they borrowed at 15 percent interest, the owners of the firm realize a benefit from using leverage. ⊚ true ⊚ false
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Answer Key Test name: chapter 18 8) C 9) C 10) A 11) B 12) A 13) C 14) A 15) D 16) B 17) D 18) B 19) C 20) B 21) D 22) C 23) C 24) C 25) C 26) A 27) C 28) A 29) B 30) C 31) D 32) C 33) A
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34) C 35) D 36) B 37) C 38) B 39) A 40) B 41) A 42) C 43) B 44) A 45) A 46) D 47) B 48) A 49) B 50) D 51) A 52) D 53) D 54) A 55) A 56) C 57) B 58) D 59) D 60) A 61) D 62) C 63) B
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64) A 65) A 66) B 67) B 68) B 69) C 70) B 71) A 72) B 73) B 74) D 75) C 76) D 77) A 78) B 79) A 80) D 81) B 82) C 83) A 84) D 85) C 86) B 87) A 88) D 89) A 90) C 91) C 92) D 93) D
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94) A 95) B 96) C 97) D 98) D 99) C 100) B 101) D 102) D 103) B 104) A 105) C 106) D 107) A 108) C 109) C 110) C 111) C 112) D 113) A 114) B 115) D 116) B 117) B 118) D 119) A 120) D 121) D 122) Section Break 122.1) B
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122.2) A 122.3) C 122.4) C 122.5) D 122.6) C 123) TRUE 124) FALSE 125) TRUE 126) FALSE 127) FALSE 128) FALSE 129) TRUE 130) FALSE 131) TRUE 132) TRUE 133) FALSE 134) FALSE 135) FALSE 136) TRUE 137) TRUE 138) TRUE 139) TRUE 140) TRUE 141) TRUE 142) TRUE 143) FALSE 144) FALSE 145) TRUE 146) FALSE 147) FALSE
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148) FALSE 149) TRUE 150) FALSE 151) FALSE 152) TRUE 153) TRUE 154) TRUE 155) TRUE 156) TRUE 157) FALSE 158) TRUE 159) FALSE 160) TRUE 161) FALSE 162) TRUE 163) TRUE 164) TRUE 165) TRUE 166) FALSE 167) FALSE 168) FALSE 169) FALSE 170) TRUE 171) FALSE 172) TRUE 173) TRUE 174) FALSE 175) TRUE 176) TRUE 177) FALSE
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178) FALSE 179) FALSE 180) TRUE 181) FALSE 182) TRUE 183) TRUE 184) FALSE 185) FALSE 186) FALSE 187) FALSE 188) TRUE 189) FALSE 190) TRUE 191) TRUE 192) FALSE 193) TRUE 194) FALSE 195) FALSE 196) TRUE 197) TRUE 198) TRUE 199) TRUE 200) FALSE 201) TRUE 202) TRUE 203) TRUE 204) FALSE 205) FALSE 206) TRUE 207) FALSE
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208) FALSE 209) FALSE 210) TRUE 211) FALSE 212) FALSE 213) TRUE 214) FALSE 215) FALSE 216) TRUE 217) TRUE 218) TRUE 219) TRUE 220) FALSE 221) TRUE 222) FALSE 223) FALSE 224) FALSE 225) TRUE 226) TRUE 227) FALSE 228) TRUE 229) FALSE 230) TRUE 231) FALSE 232) TRUE 233) FALSE 234) FALSE 235) FALSE 236) FALSE 237) TRUE
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238) FALSE 239) TRUE 240) FALSE 241) TRUE 242) FALSE 243) FALSE 244) TRUE 245) TRUE 246) FALSE 247) TRUE 248) FALSE 249) FALSE 250) FALSE 251) FALSE 252) TRUE 253) FALSE 254) FALSE 255) FALSE 256) TRUE 257) FALSE 258) TRUE 259) FALSE 260) TRUE 261) FALSE 262) FALSE 263) TRUE 264) TRUE 265) TRUE 266) FALSE 267) TRUE
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268) TRUE 269) TRUE 270) FALSE 271) TRUE 272) TRUE 273) FALSE 274) FALSE 275) FALSE 276) FALSE 277) TRUE 278) TRUE 279) TRUE 280) TRUE 281) FALSE 282) FALSE 283) FALSE 284) TRUE 285) TRUE 286) FALSE 287) TRUE 288) FALSE 289) TRUE 290) FALSE Student name:__________ 1) Bonds represent a major source of long-term financing. What is a bond? Explain the major elements that must be in a bond issue.
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2) Explain the major advantages and disadvantages of issuing stock as a source of long-term financing.
3)
Discuss the role of investment bankers in the securities markets.
4)
Explain the differences between preferred stock and common stock.
5) The risk/return trade-off is inherent in any investment strategy. What are the five key criteria investors should consider when selecting investment options?
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6) Describe four different types of common stock that an investor may consider, depending upon the investor's strategy and risk tolerance.
7)
Corporations benefit from securities markets primarily by A) creating an efficient mechanism to invest in stocks and bonds. B) obtaining the capital they need to finance their operations. C) securing memberships on various stock exchanges. D) participating in the mutual funds of investment bankers.
8)
Private investors benefit from securities markets primarily by A) having a place to buy and sell stocks and bonds. B) obtaining the capital they need to finance their operations. C) securing memberships on various stock exchanges. D) participating in the primary markets of investment bankers.
9)
A(n) __________ refers to the first public offering of a corporation's stock.
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A) primary market offer (PMO) B) initial securities proposal (ISP) C) initial public offering (IPO) D) primary public sale (PPS)
10)
Trading in newly issued securities takes place in the A) primary market. B) secondary market. C) initial offerings market. D) corporate trading market.
11)
The trading of previously issued securities from one investor to another takes place in the A) primary market. B) secondary market. C) initial offerings market. D) corporate trading market.
12) When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by A) selling common stock. B) petitioning the government for a loan. C) purchasing additional assets. D) decreasing their accounts payable.
13) Because of their vast buying power, __________ represent a powerful force in the buying and selling of corporate securities.
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A) individual investors B) mutual banks C) institutional investors D) investment banks
14) Investment bankers __________ new issues of bonds or stocks by purchasing, at a discount, the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price. A) syndicate B) underwrite C) guarantee D) sanction
15)
Corporations receive the proceeds for the sale of their stock in A) the primary market. B) the secondary market. C) both primary and secondary markets. D) venture capital markets.
16)
Security markets assist businesses in performing their __________ function. A) long-term investing B) long-term planning C) long-term financing D) concurrent controlling
17)
Which would be classified as an institutional investor?
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A) pension funds B) the Federal Reserve C) stock exchanges D) commodity brokers
18)
Most businesses prefer to meet their long-term financial needs through A) debt financing. B) capital from the sale of stock. C) retained earnings. D) capital from the sale of bonds.
19) Investment bankers provide __________ services by purchasing the entire new security issue from a corporation seeking to raise capital and selling it to interested investors. A) underwriting B) investing C) leveraging D) discounting
20)
How do investment bankers generate revenues for their firms?
A) They invest their own funds, or the funds of others, in mutual funds and commodities. B) They earn commissions by managing the investments of insurance companies and mutual funds. C) They buy, at a discount, the entire issue of a new security and then sell the issue to investors at full price. D) They receive consulting revenues from the advice they offer the Securities and Exchange Commission.
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21) Razor Manufacturing plans to issue $100 million of common stock. The firm will likely rely on the advice and assistance of A) the Federal Reserve bank. B) a commercial bank. C) a mutual fund. D) an investment banker.
22) Camilla, a shareholder in Davis, Inc., sells 100 shares of Davis stock to Pete. This transaction takes place in the A) primary market. B) secondary market. C) initial offerings market. D) security resale market.
23) As the chief financial officer, you identify that your firm needs to raise additional funds by selling new shares of stock. What specialist would be able to assist your firm in the issue and sale of new securities? A) an investment banker B) a commodities broker C) an officer of the Securities and Exchange Commission (SEC) D) an institutional investor advisor
24) As a new father, Dele plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dele with
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A) financing opportunities. B) investing opportunities. C) opportunities to reduce his taxes. D) borrowing opportunities.
25) Shondra has a brokerage account with a large investment firm. This morning her broker called asking if she is interested in participating in an IPO. The broker went on to say that he could get her 300 shares for $33/share. If Shondra agrees to buy the IPO, the trade will take place in the A) fair trade market. B) outer market. C) primary market. D) secondary market.
26) Gamers, Inc., needs several million dollars to expand and follow its strategic plan. In negotiations with the investment banker, the company agree to issue 50 million shares of common stock, at $25/share. If the investment banker's fee for underwriting the total sale is 5.82 percent, what is the discounted price that the investment bank is willing to pay Gamers, Inc. for the shares? A) around $120,000,000 B) around $1,200,000,000 C) around $140,000,000 D) around $14,000
27) Which term best describes the relationship between the New York Stock Exchange and the NASDAQ?
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A) cooperative B) dependent C) competitive D) disastrous
28) An organization whose members can buy and sell securities for companies and investors is known as a A) public securities dealer. B) securities facilitator. C) transfer medium. D) stock exchange.
29) A company's stock does not have to be listed on one of the major stock exchanges in order to trade. It can be traded on A) the over-the-counter market. B) NYSE Euronext. C) NASDAQ. D) AMEX.
30) If a publicly traded corporation fails to maintain specific minimum requirements, the exchange can __________ the firm's securities. A) relist B) transfer ownership of C) delist D) provide preemptive rights to
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31)
The __________ is a large national electronic stock trading market. A) SEC B) NYSE C) NASDAQ D) NLRB
32)
Which entity trades corporate stocks not listed on the national securities exchanges? A) Federal Investment Assurance Agency B) American Stock Exchange C) over-the-counter market D) Chicago Board of Trade
33) A(n) __________ represents a condensed version of the registration statement that enables prospective investors to evaluate a stock for possible purchase. A) insider report B) securities disclosure C) evaluative report D) prospectus
34) Which federal government agency is responsible for regulating the various stock exchanges in the U.S.? A) SEC B) BBB C) FCC D) FTC
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35) Using information not available to the public to unfairly benefit in the stock market represents A) security fraud. B) an unethical, but a legal activity. C) blue-sky violations. D) insider trading.
36)
Which legislative act created the Securities and Exchange Commission? A) Dealers Trust and Assistance Act of 1933 B) Federal Trade Commission Act of 1933 C) Securities and Exchange Act of 1934 D) Bond Trading Act of 1934
37)
Which person is engaged in inside trading?
A) Josh, a stockbroker for a large investment firm, buys and sells securities for his friends on the side rather than have his friends use his firm. B) Dustin helps his friends set up an online trading account with the company he works for. C) Juanita buys and sells stocks even though she works for the Securities and Exchange Commission. D) Although it is not public knowledge, Nelson knows the firm he works for is going to merge with another company so Nelson buys shares of the other company’s stock.
38) After operating for years as a privately held corporation, Leeland Metalworks plans to publicly trade its stock. As a midsized firm, Leeland wants to avoid excessive paperwork, and the fear of being delisted in the future. The __________ provides the best fit for Iron Age's plans.
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A) over-the-counter market B) New York Stock Exchange C) American Stock Exchange D) secondary market
39) Eduardo wants to purchase stock in a company that is headquartered in Australia. Eduardo A) will have to place her order through the Sydney Stock Exchange. B) cannot legally own the stock of an Australian corporation. C) can buy the shares from a broker on a U.S. exchange. D) must obtain an investor visa to complete the purchase.
40) The Securities and Exchange Commission has accused Mandi of benefiting unfairly from information secured from a corporate officer of Echo Engineering. Because Mandi used that information to profit in the stock market, she faces __________ charges. A) insider trading B) security tampering C) corporate fraud D) short selling
41)
Which situation would be considered insider trading?
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A) You read online that Taylor Manufacturing has a new CEO, who plans to bring in his own team. You decide to call your broker and buy shares of Taylor Manufacturing. B) Your Uncle Joe works for Taylor Manufacturing and sends you a news release put out by the company that talks about the acquisition of a Japanese company. You believe this will significantly boost Taylor Manufacturing’s revenues so you buy 200 shares through an online service. C) You buy 500 shares of Taylor Manufacturing because you heard from the CEO's administrative assistant that the CEO was just fired. You figure that this emotional news has got to help the stock price. D) Your stockbroker recommends that you diversify your portfolio with a few shares of Taylor Manufacturing because its request through the FTC and several international trade commissions to finalize the purchase of two oil companies was successful. You act on this information.
42) Although you were not fortunate enough to get Luxury Links Golf Resort stock as an IPO, you are still thinking about trying to add some to your portfolio. Last week when you mentioned it to your broker, he said that there are plenty of shares trading on __________, but he wanted to send you the company's financial disclosures provided in the __________ before you finalize your decision. A) the secondary market; prospectus B) the NASDAQ; regulatory agreement C) the OTC; regulatory agreement D) the primary market; prospectus
43) Which type of security provides the owner the right to vote for the corporate board of directors? A) common stock B) bonds C) preferred stock D) callable bonds
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44)
Two kinds of equity financing are A) common and preferred stock. B) convertible and superior stock. C) fixed and variable stock. D) common and superior stock.
45)
A __________ certificate provides evidence of ownership in a specific corporation. A) stock B) bond C) debt D) capital
46) __________ represents the most basic form of company ownership and includes voting rights and dividends, if and when the firm elects to pay dividends. A) Capital stock B) Common stock C) Preferred stock D) Carrier stock
47)
__________ are the firm's after-tax profits that are distributed to stockholders. A) Equity capital B) Interest payments C) Dividends D) Retained earnings
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48) The dollar amount assigned to shares of stock by the corporation's charter represents the stock's A) net asset value. B) legal value. C) market value. D) par value.
49) When investors purchase __________ stock, they receive a priority claim in the payment of dividends, as well as assets if the business is liquidated. However, these investors do not have voting rights. A) common B) preferred C) secured D) debenture
50) Investors in __________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later. A) participating B) superior C) convertible D) cumulative
51) Each share of common stock provides the investor with a __________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue. This allows common stockholders to maintain a proportional share of ownership in the company.
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A) participating B) preemptive C) cumulative D) convertible
52)
When issuing stock to obtain long-term funding, dividend payments are A) tax-deductible. B) legally required. C) intended to discourage firms from issuing an excessive number of shares. D) not tax-deductible.
53) Similar to bond investments, preferred shares can be __________, meaning the firm may buy them back. A) cumulative B) callable C) responsive D) retroactive
54) Stock certificates represent evidence of ownership in an organization. A stock certificate indicates A) the current market value of the stock. B) the total number of shares issued by the company. C) the type of stock the investor is buying. D) the stock symbol and trading exchange of the company.
55)
Dividends are paid out of a corporation's
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A) profit, before taxes. B) profit, after taxes. C) sales revenue. D) capital contributed by bondholders.
56)
Dividends on preferred stock are A) paid after common stockholders receive their dividends. B) guaranteed, except in the event of bankruptcy. C) generally paid quarterly, when dividends are paid. D) always greater than dividends on common stock.
57) Which type of security guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders? A) call provision B) cumulative preferred C) participating preferred D) convertible preferred
58)
The disadvantages of issuing stock to obtain long-term financing include A) the legal obligation to pay dividends if the company is profitable. B) the funds contributed by stockholders must be repaid from after-tax profits. C) a reduction in the market value of the firm's products. D) a possible change in management and policies in the company.
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59) Blake impresses his friends by stating that he just cast four votes in the election of the board of directors of Energy Electronics, indicating that Blake owns __________ stock in Energy Electronics. A) preferred B) cumulative preferred C) registered D) common
60) After many years as a privately held corporation, Rundy Industries decided to offer stock to the general public. Rundy may discover that stockholders A) expect to be repaid at a future date. B) can legally demand dividend payments if the corporation maintains profitability. C) adversely affect the company's debt level. D) can exercise a significant impact on company management and policies.
61) When Isabella purchased 500 shares of preferred stock in Majestic Productions, her certificate indicated the stock had a par value of $50 per share. This means that Isabella A) will never get less than $50 per share when selling his stock. B) has shares that are currently worth $50 per share. C) may receive dividends based on this value per share. D) must receive a $5 dividend each and every year.
62) Leeland Metalworks, known for its very generous dividend policy, easily attracts investors. These dividend payments basically represent A) a part of the firm's profit distributed to stockholders. B) the increase in market share the company has earned. C) current value of the firm's stock holdings. D) income that is sheltered from taxes.
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63) Maya owns stock in Echo Technologies. Her stock provides a priority claim on dividend payments and on the firm's assets in the event of liquidation. However, her __________ stock ownership does not offer her voting rights. A) common B) preferred C) superior D) callable
64) Namrata owns 20 percentof the common stock of the Columbia Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Namrata exercises her preemptive rights, Columbia Coffee must offer her the opportunity to purchase A) 8,000 shares. B) 2,000 shares. C) as many of the new shares as the investor is willing and able to buy. D) 20percent of the outstanding preferred stock.
65) Kaden purchased 2,000 shares of common stock in Billings Corporation last year. He learned several months later that the stock does not pay a dividend. Kaden should proceed to A) hire an attorney and file a lawsuit. B) hire an attorney and go after the registered representative that brokered the trade. C) do the proper research before he invests. D) immediately proceed to sell the shares.
66) A share of preferred stock for Leeland Manufacturing currently sells for $120. It offers the investor a dividend rate of 8 percent, on a par value of $100. If the investor owns 500 shares, her total annual dividend will equal
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A) $800 B) $8.00 C) $2,000 D) $4,000
67) The corporate certificate issued to an investor that has loaned money to the corporation or government is called a A) common stock. B) preferred stock. C) bond. D) debt document.
68) Issuing bonds to obtain long-term funds legally compels a firm to pay regular __________ payments and repay the __________ at the maturity date. A) dividend; par value B) interest; bond premium C) dividend; maturity value D) interest; principal
69)
The cost of a firm borrowing money is called the A) interest rate. B) dividend payment. C) prime charge. D) opportunity charge.
70)
Another name for the fixed rate of interest attached to a bond is the
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A) yield to maturity. B) dividend. C) coupon rate. D) security rate.
71)
A bond's face value is the same as its A) risk rating. B) principal. C) coupon value. D) yield.
72)
Government bonds can vary in denomination, but most corporate bonds are issued in A) discounted denominations. B) $1,000 denominations. C) $100 denominations. D) $5,000 denominations.
73)
An advantage of selling bonds to raise long-term capital is that A) bonds increase the market’s perception of the firm. B) bonds do not have to be repaid. C) bondholders have voting rights. D) interest paid on bonds is a tax-deductible expense.
74) Issuing __________ increases a firm's debt and may adversely affect the financial community's perception of the firm.
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A) common stock B) bonds C) preferred stock D) retained earnings
75) An unsecured bond, backed only by the well-respected name of the organization, is called a __________ bond. A) mortgage B) leveraged C) debenture D) convertible
76) Corporations issuing __________ bonds pledge a tangible asset as collateral to reduce the risk incurred by a bondholder. A) secured B) endorsement C) escrow D) replacement
77) Firms establish a __________ so that sufficient funds are available to repay bondholders on the maturity date. A) mutual fund B) sinking fund C) retirement account D) encumbered account
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78) By issuing bonds with a __________, the corporation retains the right to pay off the bond prior to the maturity date. A) redemption feature B) discount clause C) retirement privilege D) call provision
79) By buying a __________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date. A) discount B) contingent C) convertible D) preferred
80) According to the Standard & Poor's Investor Services ratings, which of these ratings indicates a highly speculative bond? A) AA B) B C) C D) BBB
81)
A disadvantage of issuing bonds is that A) bonds are permanent debt on the firm's balance sheet. B) dividends are legally required. C) bonds increase the firm's debt. D) bondholders receive voting rights.
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82)
Bonds perceived as high risk typically pay __________ interest rates. A) higher B) lower C) more volatile D) less volatile
83)
The investor will receive the face value of the bond on the __________ date. A) purchase anniversary B) declaration C) maturity D) annual interest
84)
Which of these represents a special feature included with some bond issues? A) no repayment of par value B) no obligation to pay dividends C) no increase in the firm's debt level D) convertibility of a debt security (bond) into an equity security (stock)
85)
A convertible bond allows the bondholder to exchange the bond for A) preferred stock. B) common stock. C) collateral. D) debt holder privileges.
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86) Crafty Brewers, Inc. recently offered bonds for sale to the public. The unsecured corporate bond paid interest of 8percent to investors for the 20-year life of the bonds. Crafty Brewers is obligated to A) represent each bondholder as an owner in the company. B) pay interest semi-annually. C) pay stockholders their dividends, before paying bondholders their interest. D) pay each owner their principal if and when they want to cash in their investment.
87) Your Uncle Melvin is approaching retirement and he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain that A) Yankee bonds are certain not to default. B) common stock always pays quarterly dividends. C) junk bonds are the highest rated, safest bonds. D) treasury and top-grade corporate bonds pay interest two times each year.
88) Leeland Manufacturing issues a $1,000 bond, with an interest rate of 10 percent, and a maturity date of 2025. This creates a liability for Leeland Manufacturing to pay the bondholder A) $100 interest per year and $1,000 in the year 2025. B) 10percent of the selling price of the bond. C) an interest payment equal to the dividend payment distributed to the common stockholders. D) $1,100 annually until the year 2025.
89) Standard & Poor's currently rates Harland Corporation bonds as a D grade. This indicates that these bonds are
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A) of the highest quality with lowest default risk. B) moderately speculative. C) corporate bonds with variable interest rates. D) the lowest quality and the highest risk.
90) Echo Electronics decides to pay off its bonds several years before the maturity date. Apparently, the bonds A) contain an early dismissal clause. B) have an early retirement option. C) are callable. D) have discount authorization.
91) A company makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2030. This company appears to be utilizing a A) call provision. B) sinking fund. C) compensating balance system. D) retirement escrow account.
92) Trusted Toys hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years. Additionally, the certificate issued by Trusted Toys promises to pay 5percent interest annually for the ten-year life of the security. Trusted Toys intends to issue A) stocks. B) bonds. C) mutual funds. D) commodities.
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93) After owning a company bond for five years, Mouna exercised an option that allowed her to exchange her bond for 20 shares of the company’s stock. Mouna owned a A) callable bond. B) revenue bond. C) junk bond. D) convertible bond.
94) Reagan recently invested in a 15-year bond with Rocky Mountain Brewers. The bond pays 8percent interest annually and has a maturity date of 2035. The bonds are callable in 2030. If interest rates go down to 5.5percent in the year 2030, the brewery is likely to A) not exercise the call. B) exercise the call. C) give bondholders a choice of whether they want to turn the bonds back to the brewery. D) decrease the interest rate that they are willing to pay the holder.
95) Investors buying bonds and corporations issuing bonds (both) accept investment risk. Which statement is most correct when it comes to the investment risks that one or the other party accepts?
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A) If investor Jim is holding a bond that pays 5percent and market interest rates on similar bonds go down, Jim must hold the bond until maturity because if he were to sell it today, he would have to sell it at a discount. B) If investor Jim is holding a bond that pays 5percent and market interest rates on similar bonds go down, Jim’s bond is now worth more than its face value, and if he needed to sell it on the secondary market, he could probably sell it at a premium. C) If investor Jim is holding a bond that pays 5 percent and interest rates on similar bonds go up, Jim stands to gain more than the face value of the bond if he were to sell it on the secondary market today. D) If a corporation wants to issue bonds to pay for an expansion project, and analysts predict that interest rates are projected to climb over the next few years, it is to the corporation's advantage to wait until next year to issue the bonds.
96) A __________ is a registered representative acting as an intermediary to buy and sell securities for clients. A) certified stock underwriter B) stockbroker C) securities banker D) trading accountant
97)
Investors trading online A) receive more advice than offered by traditional stockbrokers. B) buy and sell securities without using a brokerage firm. C) generally do their own research and make their own investment decisions. D) generally were insured against the market downturn of the early and late 2000s.
98) firm.
Investing online is usually __________ than trading through a traditional stock brokerage
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A) more expensive B) less expensive C) more volatile D) less profitable
99) Creating a portfolio by buying several different types of investments to spread the risk of investing is called A) modulation. B) diversification. C) re-allocation. D) formula investing.
100)
Another term for portfolio strategy is A) modulation model. B) formula model. C) allocation model. D) equity model.
101)
When an investor purchases a security, the investor does so with the expectation of A) maintaining his or her capital position. B) minimizing risk. C) making a profit. D) providing commissions.
102) According to the “Spotlight on Small Business” box, many investors are turning to independent advisors rather than large Wall Street firms because
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A) investors view the independent advisors as being less biased and more concerned about the investor. B) investors think that independent advisors are more knowledgeable. C) independent advisors cannot hold dual registrations as brokers and advisors. D) independent advisors operate on a commission-free basis.
103)
Online trading services target those investors who A) require the research and advice of a licensed stockbroker. B) are interested in purchasing government bonds. C) are willing to do their own research. D) trade the securities of foreign firms.
104) Of the five criteria for selecting an investment option, which one measures how quickly an investor has access to his/her invested funds, if they are needed? A) risk B) tax consequences C) yield D) liquidity
105)
Diversification means A) allocating all your investment funds into one type of investment. B) buying investments on margin. C) being knowledgeable about the various types of investment opportunities. D) allocating your investment funds to several types of investments.
106)
The risk/return trade-off investors assume means
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A) the less you risk, the more you stand to gain. B) the same as diversification of your portfolio. C) you will assume added risk, if you believe you can get a greater return. D) the goal is to never risk liquidity; your investments should always be liquid and of short duration.
107) Charlie and Molly plan to invest in corporate securities. While Charlie plans to retire next year on his 65th birthday, Molly is celebrating her first job after college and her 22nd birthday. Which of the two investors would be well advised to choose a more conservative investment strategy? A) Charlie B) Molly C) A conservative investment strategy is always the best strategy for both of them. D) It depends on whether they want to invest in stocks or bonds.
108) Though Mateo relies on his stockbroker to execute his buy and sell orders for shares of stock, he has found that the process of buying or selling a share of stock on a major stock exchange normally takes A) weeks. B) seconds. C) days. D) months.
109) Having just returned from serving with the U.S. Marines in Afghanistan, Nestor has managed to save most of his earnings. He has enrolled in the local community college and he is back living with his parents while he assimilates back into U.S. life. As his business major friend, he has come to you for advice. He would like to see his $40,000 savings grow, yet he knows that he will need it in about five years when he and his girlfriend are out of school and make plans to get married. He also worries that his car may break down and he will need to invest in another used car. What would you suggest for Nestor?
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A) In order for Nestor to see growth, he will need to place the entire $40,000 in one stock offering. You suggest a biotech stock that promises growth. B) Nestor is still young. He needs to consider high-growth, higher-risk stocks and corporate bonds. He is young enough to recoup his investment if it should experience a loss. C) Nestor should determine what types of companies he is passionate about. He should lead with his heart but should be warned that some of those companies will produce better yields than others. D) Since liquidity is a concern, Nestor would do best to diversify into four to eight different investments, and keep a reasonable amount in cash (a savings account) for emergencies.
110)
An investor who purchases stock in a company becomes a(n) A) creditor. B) owner. C) prospect. D) buyer.
111)
The market price of a share of common stock depends heavily on A) the number of stocks traded on the New York Stock Exchange. B) the default rate on U.S. government bonds. C) the overall performance of the company. D) the relative value of the U.S. dollar compared to the euro.
112)
When an investor sells a security for more than the purchase price, the investor earns a(n) A) dividend payment. B) appreciated interest receipt. C) corporate benefit. D) capital gain.
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113)
The term __________ refers to investors who anticipate increases in stock prices. A) bears B) bulls C) dogs D) lions
114)
When stock prices decline steadily, investors refer to the market as a __________ market. A) bear B) bull C) dog D) lion
115) Stocks of corporations with earnings expected to increase faster than other stocks are called __________ stocks. A) penny B) growth C) preferred D) blue sky
116) Some analysts refer to __________ stocks as issues that sell for less than $2 (others say for less than $5). A) dollar B) growth C) penny D) discount
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117)
Which type of stock is historically considered high quality and usually pay dividends? A) dollar stocks B) growth stocks C) preferred stocks D) blue-chip stocks
118) Stocks offering investors a high dividend yield that generally keeps pace with inflation are called __________ stocks. A) growth B) blue-chip C) income D) penny
119) An investor places a __________ order with a broker to buy a particular stock at a specific price, if that price becomes available. A) call B) market C) put D) limit
120) An investor places a __________ order with a broker to sell a stock at the best price available at that time. A) discretionary B) market C) limit D) leveraged
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121) When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n) A) stock split. B) dividend spread. C) share dividend. D) earnings split.
122) The process in which an investor borrows a percentage of the purchase price of stocks from the brokerage firm is called A) a margin call. B) futures trading. C) buying on margin. D) dealer's account trading.
123)
What agency sets the margin rates for purchasing stock in the U.S.? A) high commissioners of the Securities and Exchange Commission B) board of governors of the Federal Reserve System C) Securities Division of the Treasury Department D) Federal Trade Commission on Exchange Markets
124)
If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be A) $32 plus a $.47 commission. B) $32.47. C) in between a low of $32 and a high of $47. D) $3,247.
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125) If an investor's strategy is: "buy low, and sell high," we could conclude that his optimism regarding future stock price increases indicates that he is A) bullish. B) bearish. C) only marginally confident about the stock market. D) lionish.
126)
In the securities markets, capital gains take place when A) the value of the Dow Jones Industrial Average appreciates. B) a security sells for more than the original purchase price. C) additional investors buy stock in an existing corporation. D) stockholders profit from the firm's use of leverage.
127) __________ stocks represent investments in emerging fields that have the potential to realize better than average increases in the stock's prices. A) Blue-chip B) Penny C) Growth D) Income
128) The stock of well-known, high-quality firms, such as Coca-Cola, General Electric, and Procter & Gamble, fit the characteristics of __________ stocks, because investors can almost always be assured a dividend and consistent stock price appreciation.
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A) growth B) blue-chip C) income D) callable
129) Corporations that want to attract more investors by lowering the selling price of their common stock might consider declaring a A) bankruptcy filing. B) cash dividend. C) margin call. D) stock split.
130) Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction. This __________ the potential return to the investor and __________ the risk. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases
131) Arielle plans to buy 100 shares of common stock in Leeland Manufacturing. She willingly accepts the risk of this investment because she A) understands that creditors are protected from risk. B) desires an opportunity to share in the success of this company. C) knows that every gambler wins occasionally. D) believes that a bear market is on the way.
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132) After buying 200 shares of common stock in Echo Electronics for $20 per share, Shafeek later sold the same shares for $25 per share. Shafeek’s capital gain on the total transaction is A) $10. B) $110. C) $1,000. D) $1,500.
133) Simon wants to supplement his current investments with a high-risk, low-priced security. Which of these best fits his strategy of high risk, low price, and a potentially high rate of return? A) time deposits B) penny stocks C) blue-chip stocks D) split stocks
134) Emilio told his broker to buy 75 shares of Clear Pharmaceuticals at the best possible price available that day. These directions indicate that Emilio placed a __________ order with his broker. A) market B) limit C) margin D) split
135) Realizing that Moore Metalworks stock currently sells for $37 a share, Andrea directed her broker to buy 100 shares if the price dropped to $31. Andrea placed a __________ order with her broker.
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A) market B) limit C) margin D) confirmation
136) Brennan told his stockbroker to buy 100 shares of Core Mining common stock if the price falls to $18 per share. Brennan placed a(n) A) market order. B) odd-lot order. C) limit order. D) contingent order.
137) that
A company announced a 2-for-1 common stock split for investors on record. This means
A) the company’s stock price will increase to reflect the value of two shares for every one share. B) each share will be worth ½ of its previous value, but shareholders' total value of the company will remain the same. C) The value of the company’s common stock will remain the same, for a short period of time, and then experience a guaranteed growth spurt. D) The shareholders will sell their shares immediately after the split and take their capital gains, as well as provide others an opportunity to invest in the company.
138) Before the announcement of a three-for-one stock split, the selling price for a share of stock in Midland Oil Refineries was $150 per share. Immediately after the stock split, the probable price per share is
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A) $450. B) $ 50. C) $350. D) $150.
139) Yeung’s stockbroker called to inform her of a margin call that requires that she pay $1,000. This indicates that the value of Yeung’s stock has A) just split. B) decreased. C) increased. D) changed causing the Federal Reserve to increase the margin rate.
140) Rhea read about Clear Pharmaceuticals and wants to buy 100 common shares at $40 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Rhea could consider is A) buying on margin. B) buying from the dealer's account. C) arranging for security funding. D) leveraging her future professional earnings.
141)
Bondholders can sell their bonds A) on the secondary market prior to the maturity date. B) early if the bonds were issued with a callable option. C) after the bonds are converted into common stock. D) after receiving the written permission of other stakeholders.
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142) Which organization provides an assessment of the relative level of risk of a particular firm's bond issue? A) Securities and Exchange Commission B) E*trade C) Wall Street Journal D) Standard & Poor's
143)
Bonds sold __________ sell for less than face value. A) on the secondary market B) at a discount C) at a premium D) any time before the maturity date
144)
Bonds offering a higher interest rate than other bonds of similar risk will likely sell at a A) secondary market. B) discount. C) premium. D) price equal to the face value of the bond.
145) The higher the risk associated with a bond issue, the __________ the interest rate the organization must offer investors. A) higher B) lower C) more stable D) less stable
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146) Which of these offers low risk, guaranteed income, and the backing by the full faith and credit of the federal government? A) municipal bonds B) U.S. government preferred stocks C) common stock in the U.S. postal service D) U.S. government bonds
147) Bonds that pay very high interest rates and typically have a higher risk of default are known as __________ bonds. A) zero-coupon B) bearer C) junk D) volatile
148)
High-risk, high-interest bonds are called __________ bonds. A) convertible B) preferred C) discount D) junk
149) that
According to the “Adapting to Change” box, a green bond is a fixed-income investment
A) is earmarked to raise money for climate and environmental objectives. B) is highly speculative and carries with it a high default risk. C) is backed by collateral in land that is protected by the Environmental Protection Agency. D) does not carry any special features such as being “callable” or “convertible.”
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150)
When market interest rates increase, the selling price of existing bonds will A) increase. B) decrease. C) remain constant. D) be less volatile.
151) The risk associated with Firm A's bond is greater than the risk of Firm B's bond. All other things being equal, investors would be willing to pay __________ for Firm B's bond. A) less B) more C) the same D) a premium
152)
U.S. government bonds are considered a secure investment because
A) the interest rates are protected from inflation and tied to the consumer price index. B) they are backed by the full faith and credit of the federal government. C) the interest rates are higher than for corporate bonds of equal duration. D) if they are lost or stolen the federal government promises to replace them when the proof of purchase is provided.
153) Amir found a $1,000 face value bond that belonged to his father. He checked The Wall Street Journal and found the bond was currently selling for $1,220. This bond will sell at a A) discount. B) premium. C) price that is overvalued. D) primary market.
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154) The new issue $1,000 face value bonds due in 2030 issued by Rocky Mountain Brewing Company are seen by investors as less attractive than other bonds offered by other businesses at the same time. The interest rate attached to these bonds will need to be __________ than other corporate bond issues in order to attract investors. A) the same B) lower C) higher D) not important because it is a new issue
155) Phoebe invests $5,000 in five Echo Electronics bonds that mature in 10 years. Unexpectedly just the week after she invests, she has the opportunity to work abroad, which she has always wanted to do, but she needs cash. Which statement most likely applies to Phoebe? A) She can immediately sell the bonds for $5,000 plus interest for the week. B) She is out of luck. She must keep the bonds for the full 10 years. C) She may immediately sell the bonds but it is unclear how much money they will sell for. D) She will be able to sell the bonds immediately on the primary market.
156) An investment that pools together investors' money in order to buy securities in many different companies or governments is a A) commercial fund. B) mutual fund. C) holding company. D) public investment corporation.
157) A mutual fund company buys securities from corporations and governments and packages them together into a mutual fund. It then
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A) sells shares of this packaged investment to interested investors. B) deposits the mutual fund into a pension fund for institutional investors. C) charges investors a fee to find out how these investments fared, so that investors can decide for themselves as to whether they want to own the investments. D) gives investors the option to bid on a share of this investment.
158)
What is a benefit enjoyed by investors in mutual funds? A) Guaranteed dividend payments are received annually. B) Investment risk is eliminated. C) Investors buy an ownership interest in many different companies. D) Investors exercise managerial authority in many different companies.
159) New investors may want to consider __________ funds, which are mutual funds that invest in one particular kind of stock or a particular kind of bond, or even stocks that are representative of the entire market. A) international B) index C) global D) relief
160) __________ are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds. A) REITs B) ETFs C) LOCs D) SRTs
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161) Buying several different investment alternatives to spread the risk helps an investor achieve A) lower rates of return. B) lower commission fees. C) isolation. D) diversification.
162) A __________ means that the mutual fund company does not charge a fee or commission for investing in the fund. A) front load B) back load C) double load D) no load
163) __________ have a set dollar goal the fund manager wants to manage. Once the fund has reached that goal, it does not accept new investors. A) No-load funds B) Closed-end funds C) Drop-off funds D) Zero-sum load funds
164) __________ represent the best way for investors to have their investments managed by a trained specialist for a fee.
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A) Individual stocks B) Mutual funds C) Corporate bonds D) Government bonds
165) To reduce the risk of investing in an individual stock, an ownership position in many different companies can be achieved by purchasing shares in a(n) A) indexed security. B) mutual fund. C) diversification bond. D) stock cooperative.
166) A(n) __________ fund describes a mutual fund that charges no commission to buy or sell its shares. A) open-end B) closed-end C) no-load D) front-load
167)
Mutual fund investors will note that
A) fund managers have not yet added foreign securities into their funds. B) mutual funds cannot be purchased through a traditional brokerage house. C) loads can vary from one mutual fund to another. The fund manager dictates the commissions and fees. D) by law, mutual funds can no longer charge loads.
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168)
The initial cost of investing in mutual funds depends in part on A) whether the fund is a load or no-load fund. B) the risk tolerance of the companies in the fund. C) the tax rate on capital gains. D) the imposition of government tariffs.
169) Lucia has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Lucia undoubtedly owns shares in a(n) A) investment trust. B) security account. C) options association. D) mutual fund.
170) Oren, a recent graduate of a community college, is about to make his first investment. A cautious way for Oren to start investing and earn a good rate of return would be to A) buy stock on margin. B) invest in an index fund. C) invest in junk bonds. D) keep his money in the bank.
171) Applying what you have learned about investments as introduced to you in Chapter 19, which list begins with the least risky investment and ends with the most risky? Least risky = 1; most risky = 5. A) 1) Bonds; 2) Mutual Funds; 3) ETFs; 4) Preferred Stock; 5) Common Stock B) 1) Preferred Stock; 2) Common Stock; 3) Mutual Funds; 4) ETFs; 5) Bonds C) 1) Common Stock; 2) Bonds; 3) Mutual Funds; 4) ETFs; 5) Preferred Stock D) 1) Bonds; 2) Common Stock 3) Mutual Funds 4) ETFs 5) Preferred Stock
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172)
The traditional market barometer used to measure the direction of the stock market is the A) Value Line Composite (VLC). B) Moody's Investment Index (MII). C) Dow Jones Industrial Average (the Dow). D) Fitch's Industrial Index (FIA).
173) The Dow Jones Industrial Average represents the average price of __________ industrial stocks. A) 11 B) 30 C) 500 D) 3
174) __________ involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount. A) Software action B) Program trading C) Curbs D) Circuit breakers
175) To reduce market volatility, __________ require that a key computer be turned off so that program trading is halted. A) ultra restraints B) trading curbs C) market stops D) market splits
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176) The Securities and Exchange Commission developed __________ to halt trading in the stock market for a short time when the market has experienced a dramatic decrease in prices. A) program trading B) online investing C) circuit breakers D) insider trading
177)
One criticism of the Dow Jones Industrial Average suggests that it
A) magnifies the fluctuations in the stock market. B) does not indicate the cause of changes in stock prices. C) is too small (too few companies) to get a good statistical representation. D) is biased causing an overstatement of bond price increases and an understatement of stock price decreases.
178)
Daily reporting of the Dow Jones Industrial Average serves to A) show the direction of the market over time. B) distort short-term fluctuations for the financial community. C) identify the beginning of a recession in the economy. D) disclose the average price of a share of stock on the major exchanges.
179)
The purpose of the SEC's circuit breakers rule is to A) prevent market disruption caused by a communication malfunction. B) halt trading for a short time following a dramatic drop in stock prices. C) allow floor traders to specialize in trading the securities of specific industries. D) prevent individuals from profiting from information not available to the general
public.
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180) Bill is reviewing the firms whose stocks have comprised the Dow Jones Industrial Average over the years. He discovers A) the same 30 stocks have been used since the inception of the indicator. B) different companies must be used each year. C) these stocks change periodically as deemed appropriate. D) there is an even mix between big and small companies.
181) Penny Stock is the chairperson of Pirate Recording Company Inc. She is the person responsible for the tremendous growth this company has enjoyed over the past three years. It was Penny's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and N'elli. These groups have generated profits of over $25 million. The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Pirate Recording. This incredible growth has delighted everyone at the company, but it has also created a major problem for Penny. Pirate Recording has never been a major player in the recording industry, primarily because of limited capital. In order to take the company to the next level Penny realizes that she will need to expand the firm's personnel and equipment. The amount of new funds required to finance this needed expansion is $150 million. Penny has started to consult with others about how to finance this major expansion of the company.
181.1) One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast-growing company to attract investors, it would have to put up collateral to back up the bond issue. The type of bond the financial advisor suggests is A) debenture bonds. B) asset bonds. C) secured bonds. D) preferred bonds.
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181.2) Penny is concerned about the interest rate risk if the company decides to issue bonds. Penny would like protection from interest rate fluctuation. Therefore, the bond issue's features should include a(n) A) equity proposition. B) call provision. C) convertibility clause. D) collateral agreement.
181.3) If Pirate Recording elects to offer an Initial Public Offering (IPO), it will involve preparing full financial disclosure with the __________. The firm is advised to solicit the services of an investment banker/underwriter, who will analyze the market and determine the best price for the new issue of Pirate Recording stock. The offering will then be sold on the __________. A) Internal Revenue Service; secondary market B) Fair Trade Commission; primary market C) Federal Trade Commission; secondary market D) Securities and Exchange Commission; primary market
181.4) If stock is issued in Pirate Recording, analysts predict that the company has potential for strong growth. The prospects for dividend payments to stockholders, at least in the beginning, are not good. Pirate Recording will need to retain its earnings to grow rapidly. The firm's stock would most likely be classified as a(n) __________ stock. A) blue-chip B) income C) growth D) capital
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181.5) Penny is impressed with contemporary high-tech companies that have listed their stock on an electronic telecommunications network of securities dealers who trade the stock. She is referring to firms such as Microsoft, Google, and Apple. Penny ideally would like her company's stock listed on the A) AMEX. B) NASDAQ. C) OTC. D) NYSE Euronext.
182)
Securities markets represent the financial marketplaces for stocks and bonds. ⊚ true ⊚ false
183) Securities markets provide private investors a place to buy and sell stocks, bonds, and mutual funds. ⊚ true ⊚ false
184) An initial public offering (IPO) represents the first time a corporation's stock is offered and sold to persons outside of the company. ⊚ true ⊚ false
185) The proceeds from a secondary market sale of securities go to the corporation whose security is being traded. ⊚ true ⊚ false
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186) In a secondary market sale of stock, the proceeds go to the investor selling the stock, not to the corporation. ⊚ true ⊚ false
187)
Corporations sell a new issuance of securities in the primary market. ⊚ true ⊚ false
188) The primary market allows an investor to purchase financial securities from other investors. ⊚ true ⊚ false
189) The secondary market is where investors (both individuals and companies) go to find someone who is interested in selling their investments to them. ⊚ true ⊚ false
190) When given a choice, businesses prefer to obtain long-term financing through retained earnings or by borrowing from a lending institution such as a bank instead of issuing stock. ⊚ true ⊚ false
191)
Issuing stock is considered equity financing. ⊚ true ⊚ false
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192)
Issuing bonds is considered debt financing. ⊚ true ⊚ false
193) Equity financing and the issuance of corporate bonds is available to all companies, especially small businesses. ⊚ true ⊚ false
194) Before issuing stock or bonds, corporations must meet the disclosure requirements of the Federal Trade Commission (FTC). ⊚ true ⊚ false
195)
An investment banking firm assists corporations in selling a new security issue. ⊚ true ⊚ false
196) When investment bankers underwrite an issue, they buy at a discounted price the entire stock issue of a firm and then sell the stock, at full price, to private investors. ⊚ true ⊚ false
197)
Only government employees represent institutional investors. ⊚ true ⊚ false
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198) Examples of institutional investors are pension funds, mutual funds, and insurance companies. ⊚ true ⊚ false
199)
Securities markets help companies raise long-term debt and equity financing. ⊚ true ⊚ false
200) Because their buying power is relatively small, institutional investors are not a powerful force in the stock market. ⊚ true ⊚ false
201)
Investment bankers can underwrite new issues of stocks or bonds. ⊚ true ⊚ false
202) Institutional investors include insurance companies, individual investors, and mutual funds. ⊚ true ⊚ false
203) Corporations receive needed funds when they sell a new issuance of a security in the primary market. ⊚ true ⊚ false
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204) Investors who trade securities buy securities they are interested in holding or sell securities to make a profit or cut losses by trading in the secondary market. ⊚ true ⊚ false
205) The Securities and Exchange Commission does not intercede in any way in the process of an IPO. Doing so would disrupt the natural process of the capital markets. ⊚ true ⊚ false
206) Government employees, public school system employees, and even employees of some large companies pay a percentage of their monthly earnings into pension funds. These funds collect a large pool of money that they invest in securities. Large organizations—such as pension funds, mutual funds, and insurance companies—that invest their own funds or the funds of others into stocks, bonds, or other securities are called institutional investors. ⊚ true ⊚ false
207) Investment bankers are in the business of underwriting securities. They profit from purchasing the new stock offering of a corporation at a discount, and then selling those shares of stock to the public at the market price. ⊚ true ⊚ false
208) Your company is privately held but needs additional funding for a planned expansion. Having never issued stock to the public, your firm is well advised to seek the assistance of an investment banker prior to an initial public offering of stock. ⊚ true ⊚ false
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209) Green Growers wants to raise an undisclosed amount of funds to expand the companyowned vegetarian restaurants overseas. The CFO of the company will negotiate with an expert at the FTC who will underwrite the issue of stock that Green Growers plans to offer. ⊚ true ⊚ false
210) Kayla inherited $35,000 when her grandfather died and decided to invest it by purchasing stock in Microsoft Corporation. As a student of business, you inform her that she can purchase stock on the secondary market. ⊚ true ⊚ false
211) Kent, a stockbroker at Epic Financial Services, called you the other day asking if you would like to purchase an IPO. "The hot new company, Tech-Mart, is going public, and I thought you might want to get in on it," he exclaimed. If you agree to buy shares of this company, this trade will occur on the secondary market. ⊚ true ⊚ false
212) Gamers, Inc. needs several million dollars to expand and become the international company that it says it wants to be in its strategic plan. After consulting with an investment banker who is willing to underwrite the issue, it learned that investors will purchase the stock for $32/share. Gamers, Inc. will receive a smaller amount for each share that is sold. ⊚ true ⊚ false
213) If an investor, Carla, buys a share of stock in Fast Electronics from another investor, Noel, Fast Electronics automatically receives a fixed percentage of the selling price. ⊚ true ⊚ false
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214) Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC, over-the-counter exchange. ⊚ true ⊚ false
215) A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership. ⊚ true ⊚ false
216) Only those with a membership on a stock exchange can buy and sell securities on that stock exchange. ⊚ true ⊚ false
217)
The Federal Trade Commission regulates the various stock exchanges. ⊚ true ⊚ false
218)
The over-the-counter market utilizes an electronic securities trading system. ⊚ true ⊚ false
219) If a company fails to meet the listing requirements of an exchange, the stock can be delisted from the exchange. ⊚ true ⊚ false
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220)
The NASDAQ is a floor-based exchange. ⊚ true ⊚ false
221)
Stock exchanges compete with each other for the listing of a corporation's stock. ⊚ true ⊚ false
222) The Securities and Exchange Act of 1934 created the Federal Trade Commission to oversee the securities markets. ⊚ true ⊚ false
223) Before a corporation's stock can be sold on a major stock exchange, the firm must provide detailed financial information to the Securities and Exchange Commission (SEC). ⊚ true ⊚ false
224)
Insider trading involves the sale of stock to employees at discounted prices. ⊚ true ⊚ false
225) The Securities and Exchange Commission (SEC) requires that all prospective investors receive a copy of a firm's prospectus prior to investing. ⊚ true ⊚ false
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226) Insider trading refers to someone who benefits unfairly from information about a security not available to the general public. ⊚ true ⊚ false
227) Insider trading laws prevent employees from buying or selling the securities of their employers. ⊚ true ⊚ false
228) Well-known foreign exchanges that also exchange the securities of U.S. firms include the Sydney Exchange and the Tokyo Exchange. ⊚ true ⊚ false
229) The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities. ⊚ true ⊚ false
230) Once a stock exchange agrees to list a company, the firm can be assured that it will always be listed by that exchange. ⊚ true ⊚ false
231)
Most exchange floors are symbolic because trades today usually take place electronically.
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⊚ ⊚
true false
232) According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially. ⊚ true ⊚ false
233) In an effort to profit from stock market trading, Thomas landed a job with the Capital Group. Thomas intends to use his position to obtain privileged information about his new employer that would not be available to the public. While he realizes that he may be benefiting unfairly, he is not acting illegally because he is an employee. ⊚ true ⊚ false
234) Antwone, an executive assistant at the Capital Group, photocopied documents detailing a major merger that will be finalized in two weeks. Antwone is thrilled to read about the merger, plans to call his broker immediately and buy stock in the company, and suggests that you should also act on his stock tip. Since you are not employed at his firm your purchase is legal. ⊚ true ⊚ false
235)
Stocks represent shares of ownership in a company. ⊚ true ⊚ false
236)
Stock certificates identify per share dividends, expressed as a percentage of par value. ⊚ true ⊚ false
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237)
Par value reflects the current market price for a stock. ⊚ true ⊚ false
238) Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders. ⊚ true ⊚ false
239) Although companies that issue bonds are required to pay interest, companies issuing stock are not required to pay dividends. ⊚ true ⊚ false
240)
When a corporation enjoys a profitable year, dividends must be paid. ⊚ true ⊚ false
241) Issuing new common stock usually expands ownership, giving all owners the right to vote for the firm's board of directors. ⊚ true ⊚ false
242)
Issuing new stock increases the firm's outstanding debt on their balance sheet. ⊚ true ⊚ false
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243) If paid, dividends come from any profits remaining after the firm has paid taxes. The company cannot deduct dividends as an expense of doing business. ⊚ true ⊚ false
244) A disadvantage of issuing stock is that stockholders have the right to be repaid their investment at any point in time. ⊚ true ⊚ false
245)
Preferred stockholders have voting rights, privileges not shared by common stockholders. ⊚ true ⊚ false
246) Preferred stockholders receive dividend payments before common stockholders are paid any dividends. ⊚ true ⊚ false
247) If a firm should find itself in bankruptcy, preferred stockholders would have claim to the value of any remaining assets before common stockholders. ⊚ true ⊚ false
248)
Preferred stock may include callable and convertible provisions. ⊚ true ⊚ false
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249) Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm. ⊚ true ⊚ false
250) Cumulative preferred stockholders enjoy the first right to purchase any new shares of stock issued by the firm. ⊚ true ⊚ false
251) Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later, before any dividends are paid to common stockholders. ⊚ true ⊚ false
252) Both preferred stocks and bonds represent funding sources that require repayment to investors. ⊚ true ⊚ false
253) Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders. ⊚ true ⊚ false
254) Paying dividends reduces a company’s tax burden since dividends are paid before paying taxes.
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⊚ ⊚
255)
true false
Common stocks have a face or par value and a fixed rate of return for investors. ⊚ true ⊚ false
256) While common stockholders of corporations have voting rights, preferred stockholders generally do not. ⊚ true ⊚ false
257) A preferred stock's par value establishes the base used for calculating the preferred stockholders' dividend. ⊚ true ⊚ false
258) A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends. ⊚ true ⊚ false
259) Preferred stockholders possess the first right to purchase any new stock the company issues. ⊚ true ⊚ false
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260) Leardon purchased 250 shares of Gorman Manufacturing last year but was not paid dividends. He now is going to hire an attorney to sue the company for failure to pay dividends. If he follows through with his plan, Leardon will probably win the lawsuit because companies are obligated to pay their stockholders dividends for owning and holding the firm's stock. ⊚ true ⊚ false
261) A share of preferred stock is currently selling for $160. It offers the investor a dividend rate of 7 percent, with a par value of $100. If the company is able to pay dividends, preferred stockholders would receive a dividend of $11.20 per share. ⊚ true ⊚ false
262) When acquiring funds through the sale of a bond, the business incurs a legal obligation to pay regular interest payments. ⊚ true ⊚ false
263) A bond represents a contract of indebtedness issued by a corporation that promises payment of a principal amount plus interest at a specified future date. ⊚ true ⊚ false
264)
The interest paid to bondholders represents the principal of the bond. ⊚ true ⊚ false
265)
The interest rate paid to bondholders is sometimes called the coupon rate. ⊚ true ⊚ false
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266) Although the interest rate is fixed when the bond is issued, the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm. ⊚ true ⊚ false
267) U.S. government bonds are considered safe investments. Therefore, they usually have a lower interest rate than corporate bonds. ⊚ true ⊚ false
268) paid.
The maturity date of a bond refers to the date on which the interest payment is due to be ⊚ ⊚
true false
269) Bond classifications include, but are not limited to corporate bonds, treasury bonds, treasury notes, and municipal bonds. ⊚ true ⊚ false
270)
Standard and Poor's and Fitch Ratings are well-known companies that rate bonds. ⊚ true ⊚ false
271) Bond interest is usually paid in two installments each year, even though the interest rate that is usually quoted is an annual rate.
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⊚ ⊚
272)
true false
Interest rates vary with changes in the state of the economy. ⊚ true ⊚ false
273) Bonds represent a permanent source of funding for companies. The money firms acquire by issuing bonds does not need to be repaid. ⊚ true ⊚ false
274)
In the language of bonds, the terms "principal" and "face value" are synonymous. ⊚ true ⊚ false
275)
Bondholders represent creditors of a firm. ⊚ true ⊚ false
276)
As a legal contract, bonds issued by different companies carry the same level of risk. ⊚ true ⊚ false
277) Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax-deductible.
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⊚ ⊚
true false
278) As creditors of a firm, bondholders enjoy voting privileges for the firm's board of directors' elections. ⊚ true ⊚ false
279)
Bonds are not allowed to be repaid before the bond’s maturity date. ⊚ true ⊚ false
280) By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community. ⊚ true ⊚ false
281)
Debenture bonds represent bonds that are not secured by collateral. ⊚ true ⊚ false
282) A sinking fund is a reserve account where the firm will periodically deposit funds in anticipation of repayment of a bond issue on the maturity date. ⊚ true ⊚ false
283) A callable bond allows a bondholder to exchange his/her bond for shares of common stock in the same corporation.
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⊚ ⊚
true false
284) The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation. ⊚ true ⊚ false
285) Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow. ⊚ true ⊚ false
286) With everything else constant, investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund. ⊚ true ⊚ false
287) A bond sold with a sinking fund provision requires the firm to allow a stockholder to exchange his/her bond for a specified number of shares of common stock. ⊚ true ⊚ false
288) A company often exercises the call provision of a bond if it is available when prevailing interest rates fall below the interest rate currently being paid to bondholders. ⊚ true ⊚ false
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289) According to the risk/return trade-off, it would stand to reason that a secured bond holds a lower interest rate than an unsecured bond. ⊚ true ⊚ false
290)
A sinking fund provision decreases the risk of repayment in the minds of the investors. ⊚ true ⊚ false
291) As he was approaching retirement, Gage began a search for a low-risk investment. He should consider buying a secured bond of a major corporation. ⊚ true ⊚ false
292) The U.S. government just announced an increase in the interest rate paid on U.S. government bonds. This will likely cause a decrease in the interest rates paid on corporate bonds. ⊚ true ⊚ false
293) Marvin is looking for an investment that will pay a little better than what he can get from a government bond. You suggest that he consider a new issue of debenture bonds by Raynor Corporation that pay 7.5 percent annually. You explain that Raynor has been in business a long time, and the debenture feature makes these bonds more secure than others. ⊚ true ⊚ false
294) A company has issued $5 million worth of bonds at 10 percent interest for 20 years. The economy has changed and now bonds of the same quality only pay 7 percent. If the bonds were convertible, the company could reissue the bonds at the lower rate and save money on interest payouts.
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⊚ ⊚
true false
295) As a registered representative of a stock brokerage firm, a stockbroker works as an intermediary to buy and sell securities for clients. ⊚ true ⊚ false
296) The high start-up costs of online businesses cause online brokers to charge higher commissions than traditional brokerage firms. ⊚ true ⊚ false
297) Online investors expect more expert advice than investors using traditional brokerage firms. ⊚ true ⊚ false
298) Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments. ⊚ true ⊚ false
299) Diversification means buying several different types of investments with the funds you have available for investment. ⊚ true ⊚ false
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300) For starters, investors should consider the return on investment, the liquidity, and riskiness of an investment. ⊚ true ⊚ false
301) A well-diversified portfolio would consist of a variety of investments and even cash for emergencies. The important thing is that the choice of investments spreads the risk. Some investments may perform very well in any one year while others may lag. Those performing well will balance out those that are underperforming. ⊚ true ⊚ false
302) The advantage of using an online broker is that these services usually provide you with a wealth of information and help you allocate your assets. Sometimes they even help you create an investment plan for life! ⊚ true ⊚ false
303) In the “Spotlight on Small Business” box, small, independent investment advisors will always be less biased than advisors working for large Wall Street firms. ⊚ true ⊚ false
304) In the “Spotlight on Small Business” box, a registered investment advisor (RIA) is required to place the client’s interests ahead of the investment advisor. ⊚ true ⊚ false
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305) Last week, Chrissy met with her financial planner, Daniel. Daniel urged Chrissy to consider only government bonds and mutual funds in her portfolio. Since she is in her 20s, Chrissy thinks she can accept a little more risk. You should suggest that it is a better plan to follow Daniel’s advice, rather than research her choices on her own. ⊚ true ⊚ false
306) Marco and his grandfather receive individualized investment advice from the same chartered financial analyst. When comparing their customized investment recommendations, it is likely that Marco’s strategy targets lower-risk investment options than the advice received by his grandfather. ⊚ true ⊚ false
307) Wang has $25,000 in his savings account. He wants to invest this money to increase its value. Wang knows, however, that in two years he will need this money to buy a new car. Wang should be concerned with liquidity when choosing an investment. ⊚ true ⊚ false
308)
Buying a stock makes the investor an owner in the firm. ⊚ true ⊚ false
309)
Investors earn a capital gain when they sell a stock for more than they paid for it. ⊚ true ⊚ false
310) The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.
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⊚ ⊚
true false
311)
A bull market occurs when overall stock prices increase. ⊚ true ⊚ false
312)
A bear is an investor that expects stock prices to rise. ⊚ true ⊚ false
313) Growth stocks are the stocks of corporations whose earnings are expected to grow faster than the overall economy. ⊚ true ⊚ false
314)
Growth stocks offer investors the attractive combination of low risk and high returns. ⊚ true ⊚ false
315)
A blue-chip stock represents a highly speculative stock investment. ⊚ true ⊚ false
316)
An income stock offers investors a relatively high dividend yield on their investment. ⊚ true ⊚ false
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317) A penny stock generally sells for a low initial price, pays regular dividends, and provides consistent growth in the stock's value. ⊚ true ⊚ false
318)
Penny stocks represent a high-risk stock investment. ⊚ true ⊚ false
319) When you place a limit order, it means you are willing to buy or sell the stock at the best price available. ⊚ true ⊚ false
320) An investor placing a market order with a broker agrees to buy or sell a stock immediately at the best price available. ⊚ true ⊚ false
321) If a company announces a stock split, the investor may receive two or more shares of the company stock, for each share of stock that the investor holds. ⊚ true ⊚ false
322)
A stock split immediately increases the value of an investor's holdings. ⊚ true ⊚ false
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323) The stocks of high-quality companies such as Coca-Cola and IBM are called blue-chip stocks. ⊚ true ⊚ false
324)
Buying stock on margin lowers the overall risk for the investor. ⊚ true ⊚ false
325) A margin call requires an investor to repay money borrowed from the broker used to purchase the stock. ⊚ true ⊚ false
326) Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm. ⊚ true ⊚ false
327)
Buying on margin is a relatively risk-free way of investing in the stock market. ⊚ true ⊚ false
328) A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase. ⊚ true ⊚ false
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329) Investing in common stock can give an individual the opportunity to participate in the success or failure of a corporation. ⊚ true ⊚ false
330) If you are willing to hold on to your growth stock long enough, at least five years or more, you will realize capital gains. ⊚ true ⊚ false
331) Buying stock on margin allows investors to increase the potential rate of return made on a stock investment. ⊚ true ⊚ false
332) If you buy 100 shares of IBM for $120/share, and the margin on your account is 50 percent, the broker will float you an interest-free loan of $6,000, until the price of IBM sufficiently rises to the point where you are willing to sell. You pay the broker back their $6,000, and you enjoy the capital gain. ⊚ true ⊚ false
333) Gifford bought a share of stock in Tolton Manufacturing for $70. When he sold the stock later that year, he received $90. The par value of the stock is $5. Gifford’s capital gain is $25. ⊚ true ⊚ false
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334) Valerie places a limit order at $48 and the stock currently sells for $61 per share, the broker will buy the stock for her. ⊚ true ⊚ false
335) Tunde owns 100 shares of stock in Razor Electronics that currently sells for $100 per share. Razor just announced a two-for-one stock split for all current stockholders. Tunde now owns $20,000 worth of stock in Razor Electronics. ⊚ true ⊚ false
336) Rico owns 100 shares in Tolton Manufacturing, currently selling for $80 per share. His stock split yesterday 3-for-1. The number of shares that Rico owns has tripled. ⊚ true ⊚ false
337) Tim purchased on margin 100 shares of stock in Razor Manufacturing for $50 per share yesterday. Today, the price of the shares dropped by $20 per share. Tim expects his broker to issue a margin call. ⊚ true ⊚ false
338) For investors who desire the least possible risk, a share of stock in an established corporation provides the safest investment. ⊚ true ⊚ false
339)
The interest earned on municipal bonds is often tax-free at the state level. ⊚ true ⊚ false
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340)
From an investor's point of view, corporate bonds offer less risk than government bonds. ⊚ true ⊚ false
341)
If an investor purchases a corporate bond, it must be held until its maturity date. ⊚ true ⊚ false
342) A corporate bond provides the owner with the right to sell the bond to other investors at any time during the life of the bond. ⊚ true ⊚ false
343)
Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond. ⊚ true ⊚ false
344) Normally, the higher the risk associated with a bond issue, the higher the interest rate the organization must offer potential investors. ⊚ true ⊚ false
345)
Bonds, like stocks, trade daily on major security exchanges. ⊚ true ⊚ false
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346)
Bonds sold at a discount are sold for more than the bond's face value. ⊚ true ⊚ false
347)
As interest rates increase, bond prices fall. ⊚ true ⊚ false
348) From an investor's viewpoint, bonds generally provide a safer investment option than does the stock of the same corporation. ⊚ true ⊚ false
349) According to the “Adapting to Change” box, a green bond is a fixed-income investment that is earmarked to raise money for climate and environmental objectives. ⊚ true ⊚ false
350) If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value. ⊚ true ⊚ false
351) Junk bonds are offered at higher interest rates than government bonds or corporate bonds with good ratings.
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true false
352) According to the “Adapting to Change” box, if an investor is looking for a way to earn tax-free income, a green bond would be a good choice. ⊚ true ⊚ false
353) Tessa prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold. ⊚ true ⊚ false
354) Jim invested in a new issue corporate bond on the primary market for $1,000, with a coupon rate of 7 percent, and a maturity date of 2025. The bond was held in his brokerage account electronically, so he did not think about it on a daily basis. In 2020, he thought about selling the bond on the secondary market to help pay for his school tuition. At that time, interest rates had climbed to 8.5 percent. This was great news for Jim because now he could sell his bond for more than the principal amount he would receive in 2025. ⊚ true ⊚ false
355) Recently, Jeremiah bought a bond with face value of $1,000. He paid $1,150 for the bond. His bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market. ⊚ true ⊚ false
356) A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund.
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true false
357) A mutual fund's purpose is rapid investment growth, not to provide diversification for investors. ⊚ true ⊚ false
358) When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies. ⊚ true ⊚ false
359)
Americans have invested over $15 trillion in mutual funds. ⊚ true ⊚ false
360) Small investors can spread the risk of investing by purchasing shares of mutual funds or ETFs. ⊚ true ⊚ false
361) Most mutual funds provide investors an opportunity to buy shares directly without using a stockbroker. ⊚ true ⊚ false
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362) A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price. ⊚ true ⊚ false
363)
A no-load mutual fund charges no commission fees to buy or sell its shares. ⊚ true ⊚ false
364) When comparing the investments of different mutual funds, little variation in the risk level exists. ⊚ true ⊚ false
365) Index funds invest in one specific type of investment; for example, an index fund might only invest in income stocks, companies whose stocks pay dividends. ⊚ true ⊚ false
366) Exchange-traded funds (ETFs) are like mutual funds because these funds permit the investor to buy shares of a collection of several stocks or shares of a collection of stocks and bonds, but, unlike mutual funds, they are traded during the day on the exchanges. ⊚ true ⊚ false
367)
The investor always pays a fee when purchasing a share of a mutual fund. ⊚ true ⊚ false
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368)
Mutual funds offer small investors an opportunity to diversify their investments. ⊚ true ⊚ false
369) The degree of risk in mutual fund investments remains nearly the same from one fund to the next. ⊚ true ⊚ false
370) Most investment advisors put mutual funds high on the list of recommended investments for experienced investors but consider them too risky for beginning investors. ⊚ true ⊚ false
371) From a risk standpoint, stocks are considered the riskiest investments, followed by mutual funds, preferred stock, and ETFs. Bonds represent a lower-risk investment. ⊚ true ⊚ false
372) Noreen landed her first job after from college. The same year, she also started her first investment account. Having met with several brokers before choosing someone to work with, Noreen wanted to make certain that her investment choices would provide for long-term growth yet satisfy her concern for diversification. The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds. Her advisor has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Noreen to start. ⊚ true ⊚ false
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373) Every time someone sells a stock believing the price has reached its maximum, someone else buys it believing the price will go still higher. ⊚ true ⊚ false
374) The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange. ⊚ true ⊚ false
375) The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency. ⊚ true ⊚ false
376) The Dow Jones Industrial Average provides us with a sense of direction (up or down) of the overall stock market. ⊚ true ⊚ false
377) The NASDAQ reports its own average that investors follow to observe trends in the market. ⊚ true ⊚ false
378)
Black Tuesday refers to the stock market crash that occurred in October 1987.
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true false
379) Program trading refers to computer trading software that automatically sells stocks when their price dips to a predetermined level. ⊚ true ⊚ false
380) Trading curbs motivate traders to utilize their computerized programs to reduce overall market volatility. ⊚ true ⊚ false
381) Stock market circuit breakers stop stock trading for a short time when the stock market experiences a significant drop in stock values. ⊚ true ⊚ false
382) Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987. ⊚ true ⊚ false
383)
The largest one-day drop in the stock market occurred in 1987—a 22percent drop. ⊚ true ⊚ false
384)
Changes in investor trust and confidence strongly influence stock market prices.
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⊚ ⊚
true false
385) The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow. ⊚ true ⊚ false
386) One of the criticisms of the Dow Jones Industrial Average is that it does not include enough stocks to provide a good representation of the entire stock market. ⊚ true ⊚ false
387) Like many stock analysts, Lydia believes that program trading greatly decreases the volatility of stock market prices. ⊚ true ⊚ false
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Answer Key Test name: chapter 19 7) B 8) A 9) C 10) A 11) B 12) A 13) C 14) B 15) A 16) C 17) A 18) C 19) A 20) C 21) D 22) B 23) A 24) B 25) C 26) B 27) C 28) D 29) A 30) C 31) C 32) C
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33) D 34) A 35) D 36) C 37) D 38) A 39) C 40) A 41) C 42) A 43) A 44) A 45) A 46) B 47) C 48) D 49) B 50) D 51) B 52) D 53) B 54) C 55) B 56) C 57) B 58) D 59) D 60) D 61) C 62) A
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63) B 64) B 65) C 66) D 67) C 68) D 69) A 70) C 71) B 72) B 73) D 74) B 75) C 76) A 77) B 78) D 79) C 80) C 81) C 82) A 83) C 84) D 85) B 86) B 87) D 88) A 89) D 90) C 91) B 92) B
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93) D 94) B 95) B 96) B 97) C 98) B 99) B 100) C 101) C 102) A 103) C 104) D 105) D 106) C 107) A 108) B 109) D 110) B 111) C 112) D 113) B 114) A 115) B 116) C 117) D 118) C 119) D 120) B 121) A 122) C
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123) B 124) B 125) A 126) B 127) C 128) B 129) D 130) A 131) B 132) C 133) B 134) A 135) B 136) C 137) B 138) B 139) B 140) A 141) A 142) D 143) B 144) C 145) A 146) D 147) C 148) D 149) B 150) B 151) B 152) B
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153) B 154) C 155) C 156) B 157) A 158) C 159) B 160) B 161) D 162) D 163) B 164) B 165) B 166) C 167) C 168) A 169) D 170) B 171) A 172) C 173) B 174) B 175) B 176) C 177) C 178) A 179) B 180) C 181) Section Break 181.1) C
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181.2) B 181.3) D 181.4) C 181.5) B 182) TRUE 183) TRUE 184) TRUE 185) FALSE 186) TRUE 187) TRUE 188) FALSE 189) TRUE 190) TRUE 191) TRUE 192) TRUE 193) FALSE 194) FALSE 195) TRUE 196) TRUE 197) FALSE 198) TRUE 199) TRUE 200) FALSE 201) TRUE 202) FALSE 203) TRUE 204) TRUE 205) FALSE 206) TRUE 207) TRUE
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208) TRUE 209) FALSE 210) TRUE 211) FALSE 212) TRUE 213) FALSE 214) TRUE 215) FALSE 216) TRUE 217) FALSE 218) TRUE 219) TRUE 220) FALSE 221) TRUE 222) FALSE 223) TRUE 224) FALSE 225) TRUE 226) TRUE 227) FALSE 228) TRUE 229) TRUE 230) FALSE 231) TRUE 232) TRUE 233) FALSE 234) FALSE 235) TRUE 236) FALSE 237) FALSE
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238) FALSE 239) TRUE 240) FALSE 241) TRUE 242) FALSE 243) TRUE 244) FALSE 245) FALSE 246) TRUE 247) TRUE 248) TRUE 249) TRUE 250) FALSE 251) TRUE 252) FALSE 253) FALSE 254) FALSE 255) FALSE 256) TRUE 257) TRUE 258) FALSE 259) FALSE 260) FALSE 261) FALSE 262) TRUE 263) TRUE 264) FALSE 265) TRUE 266) TRUE 267) TRUE
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268) FALSE 269) TRUE 270) TRUE 271) TRUE 272) TRUE 273) FALSE 274) TRUE 275) TRUE 276) FALSE 277) FALSE 278) FALSE 279) FALSE 280) TRUE 281) TRUE 282) TRUE 283) FALSE 284) TRUE 285) FALSE 286) TRUE 287) FALSE 288) TRUE 289) TRUE 290) TRUE 291) TRUE 292) FALSE 293) FALSE 294) FALSE 295) TRUE 296) FALSE 297) FALSE
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298) FALSE 299) TRUE 300) TRUE 301) TRUE 302) FALSE 303) FALSE 304) TRUE 305) FALSE 306) FALSE 307) TRUE 308) TRUE 309) TRUE 310) TRUE 311) TRUE 312) FALSE 313) TRUE 314) FALSE 315) FALSE 316) TRUE 317) FALSE 318) TRUE 319) FALSE 320) TRUE 321) TRUE 322) FALSE 323) TRUE 324) FALSE 325) TRUE 326) TRUE 327) FALSE
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328) FALSE 329) TRUE 330) FALSE 331) TRUE 332) FALSE 333) FALSE 334) FALSE 335) FALSE 336) TRUE 337) TRUE 338) FALSE 339) TRUE 340) FALSE 341) FALSE 342) TRUE 343) FALSE 344) TRUE 345) TRUE 346) FALSE 347) TRUE 348) TRUE 349) TRUE 350) TRUE 351) TRUE 352) TRUE 353) FALSE 354) FALSE 355) TRUE 356) TRUE 357) FALSE
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358) TRUE 359) TRUE 360) TRUE 361) TRUE 362) FALSE 363) TRUE 364) FALSE 365) TRUE 366) TRUE 367) FALSE 368) TRUE 369) FALSE 370) FALSE 371) TRUE 372) TRUE 373) TRUE 374) FALSE 375) FALSE 376) TRUE 377) TRUE 378) FALSE 379) TRUE 380) FALSE 381) TRUE 382) TRUE 383) TRUE 384) TRUE 385) FALSE 386) TRUE 387) FALSE
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Student name:__________ 1) Describe and compare the three major types of organizations that make up the U.S. banking system: commercial banks, savings and loan associations, and credit unions.
2) Discuss the methods the Fed uses to enact monetary policy and provide an explanation of the effects these methods have on the supply of money.
3) Compare and contrast the functions of the World Bank and the International Monetary Fund.
4)
Identify and discuss the tools and products that electronically transfer funds.
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5)
Anything that people generally accept as payment for goods and services is referred to as A) an exchange. B) money. C) a commodity. D) a bartered good.
6)
__________ occurs when goods are traded directly for other goods. A) Barter B) Direct exchange C) Investing D) Credit
7) According to the “Adapting to Change” box, which bill has eclipsed the $1 bill as the most widely distributed currency in the U.S. economy? A) $5 B) $10 C) $50 D) $100
8) The idea that coins are easier to take to market than traditional bartered items is reflected in which standard for the use of money? A) portability B) divisibility C) stability D) durability
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9)
The redesign of and new colors added to U.S. paper money are intended to A) make the currency more difficult to counterfeit. B) increase the use of the barter system. C) improve the durability of our monetary system. D) increase the portability of our money.
10)
The problem with bartering is
A) one person in the trade does not feel they got a fair shake. B) there is a significant amount of corruption in the process, and things get stolen before they are traded. C) it is not an easy process, and often cumbersome to carry goods to the place of trade. D) it has no place in today's international trading operations.
11) Today, a regular __________ is a system where you can exchange goods for other goods. You submit your goods and you receive trade credit that you can use to buy other goods. A) world market B) barter exchange C) world trade center D) trading post
12) According to the “Adapting to Change” box, why would high-denomination notes such as the $100 bill be the preferred payment mechanism of criminals? A) They can be easily transported. B) They provide a good record of transaction. C) They are hard to counterfeit. D) They are highly durable.
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13) Lorelle trades some of her homegrown tomatoes to her neighbor, Chet, for some fresh herbs from his garden. This type of trade represents an example of A) barter. B) e-commerce. C) direct exchange. D) a financial transaction.
14)
The Fed Chairman is in control of A) the world's money supply. B) the U.S. money supply. C) fiscal policy. D) the IMF.
15) The __________ category of money supply includes money that is quickly and easily accessed. A) e-cash B) M-3 C) M-2 D) M-1
16)
__________ represents the most commonly used category of the money supply. A) M-1 B) M-2 C) M-3 D) M-4
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17)
A rapid increase in the money supply may lead to a(n) A) increase in the rate of inflation. B) recession. C) decrease in interest rates. D) decrease in spending by consumers and businesses.
18)
When the value of the U.S. dollar increases relative to other currencies, A) the rate of inflation increases. B) the size of the national debt decreases. C) foreign goods become less expensive to U.S. consumers. D) U.S. goods become less expensive to foreign buyers.
19)
The strength of the U.S. dollar relative to other currencies depends mainly on A) the rate of inflation in the United States. B) the performance of the U.S. economy relative to other economies. C) how much gold backs the money supply. D) exchange rate decisions made by the International Monetary Fund.
20)
The organization responsible for conducting monetary policy in the United States is the A) Federal Trade Commission. B) Council of Economic Advisors. C) Federal Reserve System. D) Federal Monetary Control Authority.
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21)
The Federal Reserve System consists of __________ Federal Reserve banks. A) 5 B) 9 C) 12 D) 14
22)
The board of governors of the Federal Reserve System determines A) exchange rates. B) U.S. monetary policy. C) inflows and outflows of gold reserves to ensure a stable money supply. D) how much money the U.S. will loan to foreign governments.
23)
The Fed uses __________ to regulate the money supply. A) stock market investments B) the deposit requirement C) the political negotiation process D) the discount rate
24) By dictating the amount of money commercial banks must keep in the bank, the __________ represents one of the Fed's monetary policy tools. A) reserve requirement B) discount rate C) margin requirement D) working capital requirement
25)
Open-market operations involve
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A) monitoring the reserve requirement. B) the buying and selling of bonds. C) increasing and decreasing interest rates. D) participating with the IMF.
26) __________ involve(s) the Fed buying and selling U.S. government bonds to increase or decrease the money supply. A) Discounting B) Reserve requirements C) Deficit funding D) Open-market operations
27) The __________ rate represents the interest rate charged by the Fed when loaning funds to member banks. A) discount B) prime C) federal funds D) reserve
28)
The Federal Reserve acts as a __________ for checks. A) collection center B) clearinghouse C) supply house D) fraud detection center
29)
What is included in the M-2 definition of the money supply but not in the M-1 definition?
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A) currency B) checking account deposits C) traveler's checks D) savings account deposits
30)
Which is not a component included in the M-1 or M-2 definitions of the money supply? A) savings account deposits B) gold C) checking account deposits D) currency
31)
Which statement best summarizes the difference between M-1 and M-2?
A) The M-1 definition of the money supply includes only domestic currencies while the M-2 definition includes foreign currencies. B) The M-1 definition consists of hard currencies which are backed by gold and silver, while M-2 consists of soft currencies which are not backed by gold and silver. C) The M-2 definition includes everything in the M-1 definition, plus additional components such as money in savings accounts, money market accounts, and certificates of deposit. D) The M-1 money supply consists only of the currency (coins and paper money) that circulates in our economy, while the M-2 includes traveler's checks and funds in demand deposits.
32)
An increase in the rate of inflation would likely result from a(n) A) decrease in spending by the federal government. B) rise in the unemployment rate. C) rise in interest rates. D) increase in the supply of money in circulation.
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33)
A significant decrease in the money supply tends to A) reduce the supply of gold held by the federal government. B) create shortages that would cause prices of goods and services to rise. C) send the economy into a recession. D) reduce the size of the federal government's deficit.
34)
When the Fed increases the reserve requirement, banks A) must increase the dollar volume of loans they make to customers. B) must pay more to borrow from the Fed. C) have fewer funds available for lending. D) will find their balance sheets temporarily out of balance.
35)
When the Fed increases the discount rate, banks A) must purchase more government securities. B) must pay a higher rate when they borrow from the Fed. C) will lower the rate they charge to borrowers. D) must hold a greater amount of funds in reserve against deposits.
36)
One way the Fed increases the amount of money in circulation is to A) reduce taxes. B) raise the discount rate. C) buy government bonds. D) increase the reserve requirement.
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37)
When the Fed buys U.S. government bonds, the A) size of the federal deficit falls. B) discount rate rises. C) money supply increases. D) banking system loses reserves.
38) Jaylan read an article that showed a dramatic increase in money market accounts and certificates of deposit in the last quarter. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Jaylan can conclude that for the past quarter A) both the M-1 and M-2 money supplies were stable. B) the M-1 money supply has increased, but the M-2 money supply was stable. C) the M-2 money supply has increased, but the M-1 money supply was stable. D) both the M-1 and the M-2 money supplies have increased.
39) Eduardo owns an import business. After traveling to Spain on numerous occasions, he developed a taste for the local wines. An online article he read this morning suggested that the dollar has fallen sharply against the euro. Based on this information, Eduardo expects that A) American goods will become more expensive in Spain. B) Spanish wines will become more expensive in the United States. C) Spanish wines will become less expensive in the United States. D) the Spanish government will place an embargo on American exports.
40) Luxury Links Golf Resort plans to use famous birch wood from Ireland for parts of the interior of the magnificent clubhouse at its new golf resort near Charlotte, NC. According to the importer, each 10-foot slab will cost Luxury Links approximately $5,000. Looking at the exchange rates, Luxury Link’s finance director noted that $500 US dollars = $738 euros. The importer will order directly from his source in Ireland. Luxury Link’s finance director has determined that
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A) it's not a good time to buy the wood. B) it's a good time to buy the wood. C) there will be a shortage of the wood. D) it will cost less when the exchange rate of U.S. dollars to euros is just about equal.
41) The president of a small country refuses to raise taxes, but wants to expand many government services and increase the size of the country’s armed forces. He plans to pay for the desired expenditures by printing more money. If the president carries out his plan by rapidly increasing the supply of money, the country will likely experience A) a severe recession. B) reduced private sector spending. C) widespread surpluses of goods and services. D) an increase in the rate of inflation.
42) First National Bank currently has deposits of $300 million. If the Fed establishes a reserve requirement of 12 percent, First National must hold reserves of __________ against its deposits. A) $24 million B) $36 million C) $72 million D) $144 million
43) The Fed bought several billion dollars' worth of U.S. government bonds. The purpose of this action is to A) decrease the size of the national debt. B) improve its financial position by investing in relatively safe interest-earning assets. C) stimulate the economy by increasing the amount of money in circulation. D) drive up interest rates to cool off inflationary pressures.
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44)
The Fed plans to raise the discount rate to 7 percent. This indicates that
A) banks borrowing funds from the Fed will now pay 7percent on the amount they borrow. B) banks must hold funds in their vault or on deposit with the Fed equal to at least 7percent of their deposits. C) the Fed will pay 7percent on any securities issued by the federal government during the current time period. D) the amount of money in circulation can be no more than 7percent greater than the amount of gold held in reserve by the government.
45) News reports indicate that the Fed plans to announce its third increase in the discount rate in the past five months. Additional reports suggest that the Fed may also increase the reserve requirement in the near future. Apparently, the Fed perceives the number one problem facing the economy is A) the size of the federal deficit. B) unemployment. C) excessively high interest rates. D) inflation.
46) When Alan in Ames, IA uses a check to buy a tractor from David in Houston, TX, __________ different banks are involved in the transaction. A) 4 B) 12 C) 15 D) 8
47)
Early settlers of the New World relied heavily on barter because
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A) they found barter more convenient than the use of money. B) strict laws limited the number of coins that could be brought into the colonies. C) money had not yet evolved. D) they wanted to protest against British control of the banking system.
48)
__________ persuaded Congress to establish the first central bank in the United States. A) Benjamin Franklin B) David Farragaut C) Franklin Roosevelt D) Alexander Hamilton
49)
Historically, there was __________ a central bank in the U.S. A) very little resistance to B) resistance to C) insufficient funding of D) disinterest in
50)
By the time of the Civil War, the U.S. banking system operated A) as an efficient model that many other countries copied. B) under the control of the first Federal Reserve System. C) inefficiently with different banks issuing different types of currencies. D) much the same as it does today.
51)
The banking panic of 1907 and the resulting cash shortage led to the formation of the
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A) Federal Reserve System. B) Comptroller of the Currency. C) gold standard for currency, and the establishment of a gold repository at Fort Knox. D) FDIC.
52)
Under the Federal Reserve Act of 1913,
A) membership in the Federal Reserve System was made voluntary for all banks. B) federally chartered banks were required to join the Federal Reserve System. C) membership in the Federal Reserve System was required of all banks that had deposits of more than $1 million. D) all banks were required to hold reserves equal to at least 50 percent of their deposits.
53) As a response to the bank failures of the __________, a system of federal deposit insurance was established to strengthen the banking system. A) Civil War B) wildcat banking crisis of the 1880s C) Great Depression D) banking crisis of the early 1980s
54)
Which historical event motivated Congress to establish the Federal Reserve System? A) the significant outflow of gold during the Civil War B) the collapse of the Second National Bank of the United States C) the banking panic and cash shortage of 1907 D) the Great Depression
55)
The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to
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A) small businesses that are unable to obtain loans from other sources. B) banks during banking emergencies. C) major corporations that are on the verge of bankruptcy. D) the federal government when deficits exceed borrowing limits set by Congress.
56) One of the most important aspects of the banking legislation passed during the 1930s was that it established A) the Federal Reserve System. B) the gold standard for currency. C) the Comptroller of the currency. D) federal deposit insurance.
57)
The Federal Reserve represents a "bankers' bank" because
A) it was created as a central clearinghouse for the transactions of the largest banks. B) commercial banks compete with the Fed for business customers. C) it lobbies Congress in support of banking reform legislation. D) it holds the deposits of commercial banks and makes loans to banks that need additional funds.
58)
Which statement most accurately represents the history of U.S. banking?
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A) Although many technological changes have occurred, and banks have grown tremendously in size, the basic structure of banking in the United States has survived since the Revolutionary War. B) A major trend in U.S. banking was a move from federal control during the 1800s and early 1900s to a system now controlled by individual states. C) Although the early history of banking in the United States was very chaotic, the establishment of the Fed stabilized the banking system. D) The U.S. banking system has experienced a great deal of change and instability throughout its history.
59) A __________ is a profit-seeking organization that receives deposits from individuals and corporations and uses some of these deposits to make loans. A) credit union B) Federal Reserve Bank C) commercial bank D) consumer finance company
60)
Commercial banks primarily serve two types of customers— A) depositors and borrowers. B) commercial clients and residential clients. C) secured creditors and unsecured creditors. D) short-term borrowers and long-term borrowers.
61)
What is the technical name for a checking account? A) free deposit B) variable annuity C) demand deposit D) certificate of deposit
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62)
The technical name for a savings account is a A) time deposit. B) demand deposit. C) deferred account. D) retained income account.
63)
A time deposit that earns interest is a A) certificate of deposit. B) checking account. C) discount deposit. D) debit account.
64) Traditionally, banks provide loans to individuals and companies according to the recipient's A) future earnings potential. B) family history. C) volume of credit already established. D) creditworthiness.
65) A(n) __________ accepts savings and checking account deposits and provides home mortgage loans. A) nonbank B) insurance company C) savings and loan association D) commercial finance company
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66)
Savings and loan associations are sometimes known as A) nonbanks. B) thrift institutions. C) credit unions. D) bankers' banks.
67) __________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans. A) Mutual thrift associations B) Credit unions C) Commercial banks D) Mutual fund companies
68)
Traditionally, life insurance companies, pension funds, and brokerage firms are known as A) nonbanks. B) thrift institutions. C) bond companies. D) federally chartered banks.
69) __________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members. A) Annuity accounts B) Pension funds C) Individual retirement accounts D) Term-life retirement funds
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70)
Commercial banks, savings and loan associations, and credit unions A) specialize solely in loaning money for home mortgages. B) operate as nonprofit organizations. C) deposit their excess funds with the U.S. Treasury. D) accept deposits and make loans.
71) According to the “Reaching Beyond Our Borders” box, after the financial crisis of 2008, weak economies in Japan and Europe resulted in A) high interest rates being offered to investors to keep banks solvent. B) investors moving their money from long-term investments to short-term investments. C) banks depositing their excess funds with the U.S. Treasury. D) interest rates dropping below zero on some bank deposits hoping to spur spending.
72)
Originally, savings and loan associations
A) offered brokerage services to small investors. B) promoted consumer thrift and home ownership. C) acted as a fiscal agent for the federal government, and issued and redeemed U.S. savings bonds. D) handled the overflow of business from national and state banks.
73)
Which institution represents a nonbank? A) life insurance company B) savings and loan association C) credit union D) thrift institution
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74) Wayne keeps $25,000 in an interest-bearing time deposit with Commercial Bank. While earning a relatively attractive rate of interest, Wayne had to agree to not withdraw any of the funds until the end of a three-year period. Wayne’s investment represents a(n) A) passbook savings account. B) negotiable order of withdrawal (NOW) account. C) individual deferred earnings account (IDEA). D) certificate of deposit (CD).
75) Marcus would like to have his brokerage firm handle more of his financial needs because he has been pleased with the service provided when he bought and sold stocks and bonds. If he explores the services offered by such firms in more depth, he will find that A) federal laws prohibit brokerage firms from competing with banks, savings and loan associations, and credit unions. B) although brokerage firms can offer some banking services, they typically are less efficient at providing them than banks, because they specialize in buying and selling securities. C) brokerage firms are becoming serious competitors for banks and other depository institutions by offering high-yield combination savings and checking accounts and money market accounts, as well as certain types of loans. D) although brokerage firms offer attractive banking services, federal law prohibits individual investors from holding both a checking account and a securities account with the same firm.
76) Ramon works at a community college and the college requires all employees to contribute to a pension fund. At this time, he is not too worried about the safety of this contribution because
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A) the pensions fund's investments are always backed by the full faith and credit of the U.S. government. B) pension funds are provided by nonbanks so they are not going to take this money and lend it to others. C) he is considered a state employee, and as such, he is protected from this fund going bankrupt. D) pension funds usually make conservative investments.
77) Noreen is an investment specialist for the Cheyenne County Workers’ Union Pension Fund. Her job involves deciding how to invest the contributions paid into the fund. Which statement about Noreen’s job is true? A) She works for a bank. B) She will probably invest most of the pension's funds in safe corporate stocks and other conservative investments such as government securities. C) In order to qualify for maximum tax benefits, the funds Noreen invests all must be contributed by the companies who employ members of the Workers’ Union, rather than by the union members themselves. D) The purpose of the investments Noreen is making is to increase the current pay of union members.
78)
An independent agency of the U.S. government that insures bank deposits is the A) National Deposit Assurance Cooperative. B) Federal Deposit Insurance Corporation. C) Insurance Corporation of America. D) Deposit Protection Fund.
79)
How did banks contribute to the recent financial crisis?
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A) They began to offer investment products other than demand and time deposits. B) They provided loans higher than the discount rate. C) They made risky loans and then created mortgage-backed securities from the assets they held. D) They refused to sell anything other than fixed-rate mortgages.
80)
The __________ insures holders of accounts in savings and loan associations. A) Savings Association Insurance Fund B) Federal Savings Protection Agency C) Savings and Loan Assurance Corporation D) National Savings Deposit Insurance Cooperative
81)
Designed to create more confidence in banking institutions, the FDIC was established A) soon after the Civil War. B) in 1908, as the result of the banking panic in 1907. C) in 1917, as the nation entered World War I. D) during the Great Depression of the 1930s.
82)
The __________ insures deposits held in credit unions. A) Federal Credit Insurance Agency (FCIA) B) Credit Union Insurance Fund (CUIF) C) Federal Deposit Insurance Corporation (FDIC) D) National Credit Union Administration (NCUA)
83)
The Federal Deposit Insurance Corporation (FDIC) operates as a(n)
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A) department of the Federal Reserve System and sells insurance to mortgage holders. B) independent agency of the U.S. government. C) arm of the Department of the Treasury. D) private nonprofit cooperative operated by member banks, offering insurance premiums for banking clients.
84)
The purpose of creating the FDIC was to A) restore confidence in banking institutions. B) serve as clearinghouses for transactions involving commercial banks and savings and
loans. C) provide federally guaranteed insurance to small businesses at low cost. D) help the Federal Reserve enforce reserve requirements.
85) Waleed has $42,000 in a savings account with the Hamilton Credit Union. While economic conditions have caused financial institutions to struggle, Waleed feels that his money is safe due to the fact that the credit union's accounts are protected by the A) Federal Deposit Insurance Corporation (FDIC). B) Credit Union Insurance Fund (CUIF). C) National Alliance of Credit Union Underwriters (NACUU). D) National Credit Union Administration (NCUA).
86) Victor banks at a commercial bank that advertises its membership in the FDIC. This means that A) the bank guarantees it will pay the highest possible interest rate on his savings. B) his money is insured by an independent agency of the federal government. C) his money is automatically invested in securities issued by the federal government. D) the bank is a member of a larger consortium of banks that will enable Victor to cash checks and obtain basic bank services in virtually any major city in the United States.
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87) After Noel and Elana deposited nearly $55,000 in a savings account at Frontier Bank, the bank failed and filed for bankruptcy. Because Frontier Bank was an FDIC member bank, Noel and Elana A) should be protected because their account is fully insured by the FDIC. B) can recover up to $25,000, but they will probably lose the rest since their deposits exceed the maximum coverage offered by the FDIC. C) will lose their savings because the FDIC only insures business deposits. D) will be eligible to recover 80 percent of the value of their deposit, less a $2,500 deductible.
88) Lester deposited $66,000 in various individual accounts at his local credit union. He and his wife also have a joint savings account worth $54,700. What portion of these deposits is insured? A) $0, because the NCUA does not insure individual credit union deposits. B) $66,000 C) $54,700 D) $120,700
89)
For banks, check-processing activities
A) still represent the cheapest way to permit customers use of their funds. B) are expensive and time consuming. C) are not trustworthy and reliable. D) are extremely efficient and have deterred customers from using other ways to access their funds.
90)
What is a major difference between online banks and traditional banks?
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A) The government does not regulate online banks. B) Traditional banks are prohibited from having ATMs. C) Online banks have lower overhead costs. D) Traditional banks offer less personal care and attention to customers.
91) The __________ provides the same results as a check because it withdraws funds from a checking account. A) credit card B) debit card C) smart card D) cashier's check
92) A(n) __________ allows money to be exchanged electronically more quickly and more economically than with paper checks. A) electronic check conversion (ECC) B) electronic funds transfer system (EFT) C) virtual banking operation (VBO) D) telechecking system (TELE)
93)
__________ replace the typical magnetic strip on a credit or debit card with a chip. A) Smart cards B) Direct deposit cards C) E-cards D) Check conversions
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94) A feature of a(n) __________ is that it can include an embedded RFID chip that allows the holder to access secure areas in buildings or buy gas with the swipe of a card. A) smart card B) direct deposit card C) e-card D) check conversion card
95) On payday, employers can designate their banks to electronically transfer funds from the business's checking account to the employees' checking account. This represents an example of a(n) A) debit card system. B) check kiting system. C) electronic check conversion. D) direct deposit.
96)
Payroll debit cards
A) are protected if lost or stolen. B) have limited use because they can only act as a credit card, and the recipient does not have access to cash. C) must go through the Federal Reserve's Automated Clearing House system. D) can be issued to persons without bank accounts who can use them to pay bills online, or access cash from an ATM.
97) Which statement explains why online banks often offer their customers better interest rates than traditional banks?
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A) Online banks provide their customers a greater sense of security. B) Traditional banks charge lower prices for financial services. C) Online banks have lower overhead costs. D) Traditional banks offer the electronic transfer of customer funds.
98)
When a customer purchases an item with a debit card,
A) they actually are taking out a short-term loan with 30 days to pay before any interest is charged. B) the payment flows first through an electronic clearinghouse which then sends the customer a bill. C) the transaction duplicates the process of a credit card. D) the funds are automatically transferred from the customer's account to the store's account.
99) Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because A) traditional payments are subject to regulation by the Fed and electronic transactions are not. B) electronic funds are subject to a smaller reserve requirement than traditional funds. C) electronic funds transfer is more efficient and less expensive for banks than traditional check-based payments. D) the bank generates advertising revenue from its website.
100) As is common payroll procedure for most employers, Cheryl’s company __________ her paycheck semimonthly into her checking account. This is a paperless process and no check is issued to the employee. By logging into her personnel system, Cheryl has record of the net pay that was deposited into her personal checking account and an account of how much was taken out for taxes, Medicare, social security (FICA), and other deductions. Cheryl’s company has adopted an efficient __________ system.
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A) debits; enterprise funds transfer B) debits; electronic funds transfer C) direct deposits; electronic funds transfer D) markets; smart card
101) Will travels extensively for his company. He stays at hotels that provide him with a(n) __________ that is imbedded with his personal information as well as a code to unlock his hotel room. A) smart card B) RFID tag C) credit card D) automatic key
102) Lorenzo has an authorized work permit issued by the U.S. government to work in the U.S. Each day, he travels from Mexico to El Paso, TX, to work in the construction trade. At the time that he was first employed, his U.S. employer issued him a(n) __________. Each week, the employer scans his work stipend onto it. Lorenzo can purchase with it, access cash through an ATM with it, and transfer funds with it. The risk for Lorenzo is __________. A) paycheck; if the check is stolen, he is out the money. B) payroll debit card; it serves as a credit card, so if stolen he is out the money and any money he had left from the previous pay date. C) payroll debit card; if it is lost or stolen and someone successfully uses it to make purchases, he has no recourse—he is simply out the money. D) ETF voucher; minimal because funds are transferred directly from the employer's account to the employee's account.
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103) Omar searched for a new bank prior to filling out his direct deposit form at his new employer. He noted that Anytime Bank—an online bank—offered higher interest rates on savings accounts and money market accounts; and it offered other amenities such as online banking and funds transfer that many traditional banks offer. What is the most logical reason that Anytime Bank can compete for customers by offering higher interest rates? A) The bank probably cannot compete this way, for long. In order to build its market share, it is offering this as a one-time promotion. B) Its bank reserve requirement is less, due to the fact that the assets it is holding are not as substantial as bigger, traditional banks. C) The bank has no buildings and locations. Due to low overhead, it is able to share the savings it realizes with its customers. D) The bank pays its employees less than other banks.
104)
Which service provided by banks helps companies conduct business in other countries? A) transaction letters B) certificates of deposit C) banker's depositories D) currency exchange
105) A __________ represents an agreement by a bank to pay a foreign company a given amount if certain conditions are met. A) certificate of deposit B) banker's acceptance C) callable option D) letter of credit
106) A __________ represents an unconditional agreement by a bank to pay a specified amount at a particular time.
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A) certified trade acceptance B) banker's acceptance C) letter of credit D) guaranteed funds agreement
107)
If the Fed increases interest rates in the U.S. relative to other nations,
A) foreign investors are likely to transfer funds to U.S. investments. B) foreign investors are likely to reduce their investment in U.S. securities. C) foreign governments will likely reduce their interest rates further, to remain complementary to what the U.S. is doing. D) foreign investors will see this as a sign of a looming recession and redirect their funds to time deposits.
108) The __________ primarily provides for the financing of economic development projects throughout the world. A) International Monetary Fund B) International Reserve Bank C) World Bank D) World Development Authority
109)
The World Bank provides funding for A) the developed nations in Europe and Asia. B) firms that want to participate in international trade but lack foreign exchange. C) multinational corporations that have a strong credit rating. D) projects to improve the standard of living in less-developed nations.
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110)
Which institution helps to provide for the smooth flow of money between nations? A) International Monetary Fund B) Foreign Exchange Bank C) World Bank D) International Exchange Center
111)
Critics of the World Bank charge the organization with A) financially supporting the military of oppressive leaders. B) financing projects that damage the ecosystem. C) lending most of its money to poor nations. D) a wide array of computer security violations.
112) When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit A) provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch. B) pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay. C) requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange. D) provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.
113) Which institutions monitors the monetary policies of member nations to ensure a global monetary system that works best for all nations?
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A) International Monetary Fund B) World Bank C) International Development Administration D) International Reserve Bank
114) Which institution primarily finances economic development projects in less-developed countries? A) International Monetary Fund B) World Bank C) International Development Administration D) International Reserve Bank
115) The Fed announces that it intends to implement policies to increase interest rates. Which statement correctly identifies the most likely result of higher U.S. interest rates? A) More money will flow into the United States from foreign investors. B) The economy will experience an increase in business investment spending. C) The value of the dollar will fall relative to other currencies. D) The rate of inflation will increase.
116) Gourmet Importers arranged to have an Australian winery ship a large quantity of fine wine to the United States. By signing a(n) __________, Gourmet Importers authorized its bank to make full payment to the Australian winery if and when the wine arrives at the Gourmet Importers’ warehouse in New York. A) letter of credit B) certificate of deposit C) trade agreement D) banker's acceptance
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117) Paul works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Paul A) must be aware of federal limits on the total amount of U.S. funds his bank can lend to foreign borrowers. B) can only make loans if his bank has funds in excess of those sought by American firms. C) is likely to approve loans to foreign borrowers if the return is high enough to justify the risk. D) must be careful to get approval from the International Monetary Fund.
118) It is no secret these days that the Republic Bank of China is fat with cash from the increasing rate of Chinese exporting. As a smart player on the global stage, which strategic decision will the Republic Bank of China probably make on a daily basis? A) Invest its free cash in the securities of other nations whose interest rates remain at a low and acceptable rate, for a long period of time. B) Limit its global investment of free cash, and continue to invest in the construction trade in China, to build more factories, while providing its clientele with the highest possible interest rates. C) Invest its free cash in the securities of other nations that do not participate in the same type of industries such as soft goods and electronics. D) Invest its free cash in the securities of other nations where it can get the highest available interest rate, for the shortest period of time.
119) The World Bank's mission is to lend money to developing nations to help boost their economic development in various industries. Since its inception, the World Bank has taken significant criticism of its programs. Farmers in a cooperative in a developing nation have benefited by World Bank loans. Most recently, however, their processing facilities that employ several laborers are taking criticism from human rights organizations. After studying this chapter, which of the following is a common criticism of these groups?
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A) The loans are too small, for all practical purposes. Farmers are spending their funds on sustainability measures rather than producing the most they can from each crop. B) Working conditions in the processing plant are unacceptable, similar to sweatshop conditions. C) The country is most likely not paying back its loans, and still asking for the World Bank to raise its debt ceiling. D) Farmers who own the cooperative are not vaccinating their workers against AIDS, even though the World Bank partners with pharmaceutical firms who provide free AIDS medications.
120) The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement, his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank. Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century, we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past."
120.1) During Red's time as head of the Bank of Bramblewood, the bank offered three services: time deposits, demand deposits, and home and business loans. Under Patty's leadership, the bank offers those same services, a variety of investment opportunities such as mutual funds and bonds, and __________ through the Internet, which supports a number of services such as paying bills directly from customers' accounts, direct deposit, and transferring money.
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A) demand deposits B) online banking C) passbook banking D) composite banking
120.2) Since the Great Depression, the Bank of Bramblewood has the FDIC designation. What does this mean? A) The bank is a member of a consortium of banks that can pool funds to make loans too big for any single bank to finance. B) The bank gives preference to veterans. C) The depositors of the bank are also its owners. D) Individual accounts at the bank are insured by an independent agency of the federal government.
120.3) The Bank of Bramblewood promotes a sustainability initiative encouraging all transactions increasingly to be paperless. Each time the bank issues checks or sends out a paper statement, it includes a promotion asking customers to support methods that eliminate paperwork. The bank encourages customers to use debit cards, smart cards, direct deposit, and direct payments, as well as online statement retrieval. All of these tools are used in conjunction with the bank's A) electronic funds transfer system. B) automated deposit system. C) check clearinghouse system. D) limited documentation checking program.
120.4) Under Patty's leadership the Bank of Bramblewood would like to increase its loans to customers, but its resources are currently limited by a high reserve rate. As a Federal Reserve member bank, it will borrow additional funds from the Fed and charge its customers an interest rate that is higher than the
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A) reserve rate. B) federal funds rate. C) discount rate. D) prime rate.
120.5) As the bank has grown and expanded to other towns in its region, several of its business customers are participating in global trade. Which service provided by the bank would help companies conduct international business? A) letters of credit B) banker's transactions C) certificates of deposit D) trade exchange letters
121)
Economic growth and the creation of jobs depend on the availability of money. ⊚ true ⊚ false
122)
Most countries restrict the flow of money in and out of their borders. ⊚ true ⊚ false
123)
Economic events in other nations seldom impact the powerful U.S. economy. ⊚ true ⊚ false
124)
Barter is the trading of goods and services for other goods and services.
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⊚ ⊚
true false
125) Barter involves the use of electronic payment systems, like PayPal, for online transactions. ⊚ true ⊚ false
126)
Money is anything people generally accept as payment for goods and services. ⊚ true ⊚ false
127)
Efficient monetary systems eliminate the use of barter. ⊚ true ⊚ false
128) A barter exchange is a system where you input into a system the goods and services that you are willing to trade, and receive trade credit. ⊚ true ⊚ false
129) As it relates to the standards for a useful form of money, coins and bills are both portable and durable. ⊚ true ⊚ false
130)
The strength of the U.S. money system rests on the silver content of the coins.
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⊚ ⊚
true false
131)
Electronic money is a newer form of money. ⊚ true ⊚ false
132)
Historically, coins and paper money complicated the exchange process. ⊚ true ⊚ false
133)
The U.S. government has done its best to create dollar bills that are easily duplicated. ⊚ true ⊚ false
134) Companies are now developing ways to send money across international boundaries using e-money. ⊚ true ⊚ false
135)
The president of the United States is in control of the U.S. money supply. ⊚ true ⊚ false
136) The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.
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⊚ ⊚
true false
137) Printed dollars are made with various lines of colors such as peach and blue. They have artwork that is off-center, and there are other identifiable watermarks for the purpose of making replication quite easy. ⊚ true ⊚ false
138) The currencies of some countries, although durable and portable, are relatively unstable, which makes international exchanges difficult. ⊚ true ⊚ false
139) The problem with barter exchanges is that it is too difficult to find people to exchange your good with. ⊚ true ⊚ false
140) Trading internationally by using money appears easy and almost effortless, but the fact is there is a very complex banking system that makes it happen. ⊚ true ⊚ false
141) According to the Adapting to Change box, there are calls to remove $100 bills from circulation because they are the preferred payment mechanism of criminals. ⊚ true ⊚ false
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142) The U.S. production of the Sacagawea dollar coins provides greater durability than paper dollar bills. ⊚ true ⊚ false
143) Citizens of a small island nation readily accept a specific type of seashell as payment for the goods and services they trade. For citizens of this island nation, seashells serve as money. ⊚ true ⊚ false
144) When Noreen exchanges her famous brownies for the dog sitting services of her neighbor, she engages in a barter transaction. ⊚ true ⊚ false
145) The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services. ⊚ true ⊚ false
146)
Both the M-1 and M-2 definitions of money include coins and paper money. ⊚ true ⊚ false
147) The M-1 money supply includes money in savings accounts, mutual funds, and money market accounts.
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⊚ ⊚
true false
148)
M-2 represents the most commonly used definition of the money supply. ⊚ true ⊚ false
149)
The M-1 definition of the money supply includes travelers' checks. ⊚ true ⊚ false
150)
The M-3 definition of money includes M-1 money, but not M-2 money. ⊚ true ⊚ false
151)
A significant increase in the money supply creates inflationary pressures in the economy. ⊚ true ⊚ false
152)
Inflation occurs in an economy with too little money chasing too many goods. ⊚ true ⊚ false
153) Changes in the money supply produce little or no change in inflation, employment, and economic growth. ⊚ true ⊚ false
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154) When the value of the dollar falls, foreign goods become less expensive for American consumers. ⊚ true ⊚ false
155) The strength of the U.S. dollar depends on the strength of the U.S. economy relative to the economies of other nations. ⊚ true ⊚ false
156)
The Federal Reserve establishes the tax policies of the U.S. ⊚ true ⊚ false
157) Theoretically, with the proper monetary policy, the U.S. economy can continue to grow without causing inflation. ⊚ true ⊚ false
158)
The Federal Reserve consists of seven Federal Reserve districts. ⊚ true ⊚ false
159) The president of the United States appoints the members of the Federal Reserve's board of governors. ⊚ true ⊚ false
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160) In open-market operations, the Federal Reserve board controls the money supply by buying and selling bonds. ⊚ true ⊚ false
161) The reserve requirement represents the interest rate charged by the Federal Reserve for government-guaranteed student loans. ⊚ true ⊚ false
162) The reserve requirement represents a powerful tool of the Fed for conducting monetary policy. ⊚ true ⊚ false
163)
When the Fed increases the reserve requirement, banks make fewer loans. ⊚ true ⊚ false
164) When the Federal Reserve wants to increase the money supply, they decrease the reserve requirement. ⊚ true ⊚ false
165)
When the Federal Reserve acts to reduce inflation, they decrease the reserve requirement. ⊚ true ⊚ false
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166)
The Fed commonly buys or sells U.S. government bonds to regulate the money supply. ⊚ true ⊚ false
167)
The federal funds rate is the interest rate that banks charge each other. ⊚ true ⊚ false
168) The rate of interest the Federal Reserve charges its member banks is called the federal funds rate. ⊚ true ⊚ false
169) The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate. ⊚ true ⊚ false
170)
The Federal Reserve assists in the processing of checks between banks. ⊚ true ⊚ false
171) The electronic transfer of money increases the Federal Reserve's check-clearing operations. ⊚ true ⊚ false
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172) The goal of Federal Reserve monetary policy is to affect the level of competition in the U.S. banking system. ⊚ true ⊚ false
173) When the value of the euro increases compared to the U.S. dollar, the price of U.S. exports to Europe will decrease. ⊚ true ⊚ false
174) To decrease the money supply, the Federal Reserve sells U.S. government bonds in openmarket operations. ⊚ true ⊚ false
175) When the Fed increases the reserve requirement it forces banks to increase the number of loans they make. ⊚ true ⊚ false
176) To decrease the money supply, the Federal Reserve sells U.S. government bonds in openmarket operations. ⊚ true ⊚ false
177)
An increase in the discount rate produces a decrease in money supply.
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⊚ ⊚
true false
178)
To reduce inflation, the Federal Reserve increases the reserve requirement. ⊚ true ⊚ false
179)
By reducing the reserve requirement, the Fed intends to increase the money supply. ⊚ true ⊚ false
180)
When the Fed sells U.S. government bonds, the U.S. money supply increases. ⊚ true ⊚ false
181) If the owners of Off-Road Bicycles are trying to sell state-of-the-art bicycles into the Japanese market, they are likely to sell more bicycles if the dollar has strength against the Japanese yen. ⊚ true ⊚ false
182) Daniel read in the newspaper that his country reported a significant increase in its money supply during the past few months. This worries Daniel because an increase in the money supply means that his country might now be facing inflation. ⊚ true ⊚ false
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183) The U.S. government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures. ⊚ true ⊚ false
184) When the value of the dollar increases relative to the euro, the number of U.S. dollars needed to purchase a block of Dutch cheese increases. ⊚ true ⊚ false
185) Union Bank holds $300 million in deposits from its customers. If the Fed sets the reserve requirement at 12 percent, Union Bank must hold $24 million in cash at the bank or in noninterest-bearing deposits at the local Federal Reserve district bank. ⊚ true ⊚ false
186) Union Bank holds $650 million in deposits with the Fed. The Fed has just reduced the reserve requirement from 14percent to 12 percent. Union Bank will now have less money to lend to customers. ⊚ true ⊚ false
187) As a member bank of the Federal Reserve, First City Bank can borrow from the Fed. First City will charge the customer an interest amount greater than the discount rate. ⊚ true ⊚ false
188) Recently, the Fed announced a reduction in the discount rate and the reserve requirement. These actions clearly suggest that the Fed intends to decrease the money supply.
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⊚ ⊚
true false
189) Yesterday it was reported that the U.S. was clearly experiencing an economic downturn. A strategy the Fed may enact if the nation is facing recession is to buy government bonds in open-market operations. ⊚ true ⊚ false
190) Great news! The Fed just announced that the discount rate will rise by as much as 1percent over the next three months. This will make it easier for Seamus, the owner of a printing business, to borrow money for that new piece of equipment he needs. ⊚ true ⊚ false
191) When the U.S. was still a colony of Great Britain, land banks were created to lend money to farmers. ⊚ true ⊚ false
192) The United States first established a central bank in 1913 by establishing the Federal Reserve System. ⊚ true ⊚ false
193)
A central bank allows individual banks to deposit and to borrow funds. ⊚ true ⊚ false
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194) Thomas Jefferson proposed the establishment of the first central bank in the United States. ⊚ true ⊚ false
195) Early in our nation's history, people generally accepted the importance of a central bank authority. ⊚ true ⊚ false
196)
Alexander Hamilton persuaded Congress to create a central bank. ⊚ true ⊚ false
197)
Prior to the Civil War, the United States had two unsuccessful attempts at a central bank. ⊚ true ⊚ false
198)
In the early 1800s, the United States allowed banks to issue different kinds of currencies. ⊚ true ⊚ false
199) A series of bank failures and a cash shortage in 1907 led to the establishment of the Federal Reserve System in 1913. ⊚ true ⊚ false
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200) By the time of the Civil War, the efficient banking system of the United States was the envy of the rest of the world. ⊚ true ⊚ false
201)
The Federal Reserve System was designed to prevent a repeat of the 1907 banking crisis. ⊚ true ⊚ false
202) Thanks in part to the Federal Reserve System, few banks failed during the Great Depression. ⊚ true ⊚ false
203) Created during the Great Depression, the federal deposit insurance program resulted in a large number of bank failures. ⊚ true ⊚ false
204) In the 1930s, during the Great Depression, the government started an insurance program to protect the public from bank failures. ⊚ true ⊚ false
205)
All federally chartered banks are members of the Federal Reserve. ⊚ true ⊚ false
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206)
The Federal Reserve is the bankers' bank. ⊚ true ⊚ false
207)
Bank crises tend to correlate with economic recessions. ⊚ true ⊚ false
208) Prior to the establishment of the Federal Reserve System in 1913, the United States had no experience with a central bank. ⊚ true ⊚ false
209) The Federal Reserve, which was established in 1907 and was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks. ⊚ true ⊚ false
210) The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression. ⊚ true ⊚ false
211) The wave of bank failures during the Great Depression prompted the government to establish federal deposit insurance to protect the public from bank failures. ⊚ true ⊚ false
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212) During the Civil War, gold and silver coins were hoarded not because of their currency value, but because they were worth more than currency. ⊚ true ⊚ false
213) Commercial banks, savings and loan associations, and credit unions all represent components of the American banking system. ⊚ true ⊚ false
214)
Commercial banks offer services to depositors and borrowers. ⊚ true ⊚ false
215) Depositors represent a bank's primary responsibility, while borrowing customers are secondary. ⊚ true ⊚ false
216)
Commercial banks operate as nonprofit institutions. ⊚ true ⊚ false
217) Commercial banks attempt to profit by using funds deposited by customers to make interest-bearing loans to borrowers. ⊚ true ⊚ false
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218)
A savings account represents a demand deposit. ⊚ true ⊚ false
219)
A demand deposit is the technical name for a checking account. ⊚ true ⊚ false
220) It is against the law for banks to impose a service charge for check-writing privileges or demand a minimum deposit. ⊚ true ⊚ false
221)
A savings account is also known as a time deposit. ⊚ true ⊚ false
222) Technically, a bank can require depositors to give prior notice before they withdraw funds from time deposits. ⊚ true ⊚ false
223) According to the “Reaching Beyond Our Borders” box, a situation could exist where depositors would have to pay a bank to hold the person’s money. ⊚ true ⊚ false
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224)
Certificates of deposit (CDs) represent demand deposits issued by banks. ⊚ true ⊚ false
225)
The Federal Reserve requires that all commercial banks offer mobile deposits. ⊚ true ⊚ false
226) A growing trend today is mobile banking. In fact, an increasing number of customers make deposits by taking a photo of their checks. ⊚ true ⊚ false
227) Generally, banks focus on the creditworthiness of the borrower when determining whether to grant a loan. ⊚ true ⊚ false
228) A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness. ⊚ true ⊚ false
229) A savings and loan association (S&L) is a financial institution that accepts both savings and checking deposits and provides home mortgage loans. ⊚ true ⊚ false
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230)
Historically, savings and loans always paid lower interest rates on time deposits. ⊚ true ⊚ false
231) Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership. ⊚ true ⊚ false
232) Many S&Ls failed due to the inflation of the 1970s, deregulation, regulatory failure, and fraud. ⊚ true ⊚ false
233) Credit unions represent nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members. ⊚ true ⊚ false
234)
As nonprofit institutions, credit unions enjoy an exemption from federal income taxes. ⊚ true ⊚ false
235)
Credit unions are for-profit cooperatives. ⊚ true ⊚ false
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236) Pension funds are monies put aside by corporations, nonprofit organizations, or unions to fund the financial needs of their employees, upon retirement. ⊚ true ⊚ false
237) Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services. ⊚ true ⊚ false
238) Pension funds invest monies contributed by employers and/or employees for the benefit of their members' retirement. ⊚ true ⊚ false
239)
Large pension funds represent a powerful force in U.S. financial markets. ⊚ true ⊚ false
240) Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings. ⊚ true ⊚ false
241) Brokerage firms now compete with commercial banks by offering high-yield combination savings and checking accounts.
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true false
242) The interest paid on time deposits, today, represents the main difference between time and demand deposits. ⊚ true ⊚ false
243) The ability to access funds without a penalty helps to explain why certificates of deposit (CDs) have gained popularity among conservative investors and savers. ⊚ true ⊚ false
244) Today's consumers have fewer options and less flexibility as a result of increased regulation of the banking industry. ⊚ true ⊚ false
245) Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets. ⊚ true ⊚ false
246) Because they charge higher interest rates, commercial and consumer finance companies often fail to attract borrowers. ⊚ true ⊚ false
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247) After years of banking with Patriot Bank, Manny decided to switch to a competing institution. Thanks to changes in government regulation, his search will uncover a variety of options; however, he will also learn that banks and nonbanks have merged in order to be more competitive in the banking and financial services industries, which may or may not increase his options. ⊚ true ⊚ false
248) Andy is looking for a place to deposit a $30,000 inheritance from his grandmother. He is not planning to spend his money quickly and will need part of the funds from time to time for his college education, which he promised his grandmother. After speaking with several sales consultants in banking and nonbank institutions, Andy likes the fact that he can open a stock brokerage account and a money market account at Columbia Investment Company (a nonbank company), and will be issued checks for paying bills. You remind him that with the recent mergers between banking and nonbank institutions, he may be able to find a company that provides both the convenience of banking services and low-risk/high-risk securities products. ⊚ true ⊚ false
249) The U.S. government's lack of regulation alone caused the banking crisis and collapse of banks that had been in business for several decades. ⊚ true ⊚ false
250) Part of the reason behind the banking crisis of 2008 was that banks took the mortgages that they owned, created mortgage-backed securities out of them, and sold them as safe investments. ⊚ true ⊚ false
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251) Due to the fact that investors did not individually purchase mortgage-backed securities (MBSs) in their investment accounts, they remained unaffected when the value of some of these investments became worthless. ⊚ true ⊚ false
252) One thing is for certain; the average borrower's risk-averse behavior did not contribute to the problems that spiraled out of control and caused the recent banking crisis. ⊚ true ⊚ false
253) Persons with deposits less than $100,000 in banks, savings and loans, and credit unions run the risk of losing their money in an economic downturn. ⊚ true ⊚ false
254)
The FDIC exists to maintain the public's confidence in the banking system. ⊚ true ⊚ false
255)
When a commercial bank fails, depositors lose all their money. ⊚ true ⊚ false
256)
The FDIC traditionally protects depositors up to $250,000 per account. ⊚ true ⊚ false
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257) As a response to a rise in savings and loan failures, the federal government no longer insures holders of accounts in savings and loan associations. ⊚ true ⊚ false
258) The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations. ⊚ true ⊚ false
259) The National Credit Union Administration provides coverage up to $250,000 per individual depositor at each credit union. ⊚ true ⊚ false
260) The practices of several participants (for-profit companies, government regulators, and customers) came together to create the crisis that caused the collapse of several banks, financial services companies, and corporations. ⊚ true ⊚ false
261) There is much speculation that prior to the recent banking crisis, the Federal Reserve System (the Fed) and the Securities and Exchange Commission (SEC) were not enforcing the regulations they were charged to enforce. ⊚ true ⊚ false
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262) After the bank failures that occurred during the Great Depression of the 1930s, the U.S. government formed three organizations: the Federal Deposit Insurance Corporation (FDIC); the Savings Association Insurance Fund (SAIF); and National Credit Union Administration (NCUA) to restore people's confidence and insure deposits. ⊚ true ⊚ false
263) Tanveer need not worry that his $8,347 in a checking account at Fidelity Bank could be lost if the bank fails, because Fidelity is a Federal Deposit Insurance Corporation (FDIC) member bank. ⊚ true ⊚ false
264) Valentina has three types of deposits at her credit union. She has a checking account in her own name worth $42,000, a joint savings account with her husband, which currently holds $91,000, and an IRA account worth $145,000. Her deposits are at risk because they exceed the $250,000 limit on insurance coverage by NCUA. ⊚ true ⊚ false
265) Existing regulations prohibit online banking activities unless the bank also operates a traditional brick-and-mortar facility. ⊚ true ⊚ false
266) An electronic funds transfer system (EFT) is an electronic transaction system used for paying bills, making direct deposits of paychecks, and paying for a purchase. ⊚ true ⊚ false
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267) A debit card is better than a credit card because it allows the purchaser to float a shortterm loan, until the credit card company sends the bills at the end of the month. ⊚ true ⊚ false
268) Payroll debit cards are cheaper for employers because your paycheck is loaded on a debit card instead of cutting a check. This is convenient for customers who do not qualify for a regular debit or credit card, because they can use it to pay bills, do online purchasing, and even get cash from an ATM. ⊚ true ⊚ false
269) High overhead costs cause online banks, such as Ally Bank, to have higher operating costs than traditional banks. ⊚ true ⊚ false
270) Online banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building. ⊚ true ⊚ false
271) Although there are many features about online banking that customers do not care for, they are seldom concerned with security due to continued assurances by the banking industry. ⊚ true ⊚ false
272) In an electronic funds transfer (EFT) system, the information of a transaction is communicated from one computer to another.
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true false
273) Electronic funds transfer (EFT) tools include debit cards, smart cards, direct deposit, direct payments, and electronic check conversion. ⊚ true ⊚ false
274) Many employers offer direct deposit as a convenient and cost-saving method of distributing employee pay each month. ⊚ true ⊚ false
275)
From a bank's point of view, debit cards and credit cards are treated in identical ways. ⊚ true ⊚ false
276) Both checks and debit cards will immediately transfer funds from the customer's account to the seller's account. ⊚ true ⊚ false
277) Smart cards contain a chip that stores information about the user, such as driver's license data and bank balance. ⊚ true ⊚ false
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278) Smart cards can allow the user to access secure areas within buildings or buy gas with the swipe of the card. ⊚ true ⊚ false
279)
A direct payment is a preauthorized electronic payment. ⊚ true ⊚ false
280) Although there are many new ways to perform electronic funds transfer, legally, the only way that an employer can pay an employee is by writing a check. ⊚ true ⊚ false
281) Lower fees and better interest rates motivate customers to open accounts with online banks. However, the concern for information security encourages some customers to stay with a traditional bank. ⊚ true ⊚ false
282) While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks. ⊚ true ⊚ false
283) Haydn travels extensively on business. Most of the hotels where he stays provide him with a card that unlocks his room. The card is keyed to the particular lock that matches the lock on the assigned room and also contains Haydn’s credit card information for other hotel purchases. The type of card that Haydn is using is a smart card.
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true false
284) Avery has subscriptions to Netflix, Hulu, and all the premium cable channels. For added convenience, he has set up direct payment to these companies. This means when his statement arrives each month, he will go online and tell his bank how much to pay these vendors. ⊚ true ⊚ false
285) A letter of credit represents a promise that a bank will disburse a specified amount of funds at a particular time if certain conditions are met. ⊚ true ⊚ false
286) Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another. ⊚ true ⊚ false
287) A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met. ⊚ true ⊚ false
288) When traveling in other countries, tourists can use their MasterCard or Visa bankcards to obtain foreign currencies at ATMs. ⊚ true ⊚ false
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289) More than ever, the American economy operates as a distinctly separate entity from the international economy. ⊚ true ⊚ false
290)
International bankers prefer to invest in their own countries whenever possible. ⊚ true ⊚ false
291)
The global money markets trade about $5 trillion every day. ⊚ true ⊚ false
292) International bankers make loans wherever they can get the maximum return for their money. ⊚ true ⊚ false
293) While Federal Reserve actions impact domestic investors, they have little effect on decisions made by international investors. ⊚ true ⊚ false
294)
The World Bank primarily finances projects to protect the environment. ⊚ true ⊚ false
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295) The World Bank primarily finances projects to improve the productivity and standard of living in less-developed nations. ⊚ true ⊚ false
296)
The International Monetary Fund assists with the smooth flow of money among nations. ⊚ true ⊚ false
297)
The International Monetary Fund does not lend money. ⊚ true ⊚ false
298)
The IMF's goal is to maintain a global monetary system. ⊚ true ⊚ false
299) Given the size and strength of the U.S. economy and the widespread use of the dollar, the Federal Reserve essentially regulates international monetary markets. ⊚ true ⊚ false
300) When the Federal Reserve pursues policies that increase interest rates, the amount of foreign funds flowing into the United States also increases. ⊚ true ⊚ false
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301) Davis Industries wants to import heavy machinery from a producer located in Germany. To facilitate payment to the German firm, Davis Industries arranged for its bank to issue a banker's acceptance. Under this arrangement, the bank pays the exporter after the equipment passes inspection. ⊚ true ⊚ false
302) A relatively poor nation wants to obtain funds for a project to improve the availability of water and electricity. This nation should contact the International Monetary Fund. ⊚ true ⊚ false
303) The Roseland Community Tennis Resort plans to carry an inventory of tennis rackets from a French manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Roseland’s tennis season at its Chicago location. In order to prudently watch cash flow, you have recommended that Roseland sign a letter of credit with an international bank asking the bank to disburse payment when the rackets arrive at the Chicago location and after they are inspected. ⊚ true ⊚ false
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Answer Key Test name: chapter 20 5) B 6) A 7) D 8) A 9) A 10) C 11) B 12) A 13) A 14) B 15) D 16) B 17) A 18) C 19) B 20) C 21) C 22) B 23) D 24) A 25) B 26) D 27) A 28) B 29) D 30) B
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31) C 32) D 33) C 34) C 35) B 36) C 37) C 38) C 39) B 40) B 41) D 42) B 43) C 44) A 45) D 46) A 47) B 48) D 49) B 50) C 51) A 52) B 53) C 54) C 55) B 56) D 57) D 58) D 59) C 60) A
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61) C 62) A 63) A 64) D 65) C 66) B 67) B 68) A 69) B 70) D 71) D 72) B 73) A 74) D 75) C 76) D 77) B 78) B 79) C 80) A 81) D 82) D 83) B 84) A 85) D 86) B 87) A 88) D 89) B 90) C
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91) B 92) B 93) A 94) A 95) D 96) D 97) C 98) D 99) C 100) C 101) A 102) C 103) C 104) D 105) D 106) B 107) A 108) C 109) D 110) A 111) B 112) B 113) A 114) B 115) A 116) A 117) C 118) D 119) B 120) Section Break
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120.1) B 120.2) D 120.3) A 120.4) C 120.5) A 121) TRUE 122) FALSE 123) FALSE 124) TRUE 125) FALSE 126) TRUE 127) FALSE 128) TRUE 129) TRUE 130) FALSE 131) TRUE 132) FALSE 133) FALSE 134) TRUE 135) FALSE 136) FALSE 137) FALSE 138) TRUE 139) FALSE 140) TRUE 141) TRUE 142) TRUE 143) TRUE 144) TRUE 145) TRUE
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146) TRUE 147) FALSE 148) TRUE 149) TRUE 150) FALSE 151) TRUE 152) FALSE 153) FALSE 154) FALSE 155) TRUE 156) FALSE 157) TRUE 158) FALSE 159) TRUE 160) TRUE 161) FALSE 162) TRUE 163) TRUE 164) TRUE 165) FALSE 166) TRUE 167) TRUE 168) FALSE 169) TRUE 170) TRUE 171) FALSE 172) FALSE 173) TRUE 174) TRUE 175) FALSE
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176) TRUE 177) TRUE 178) TRUE 179) TRUE 180) FALSE 181) FALSE 182) TRUE 183) TRUE 184) FALSE 185) FALSE 186) FALSE 187) TRUE 188) FALSE 189) TRUE 190) FALSE 191) TRUE 192) FALSE 193) TRUE 194) FALSE 195) FALSE 196) TRUE 197) TRUE 198) TRUE 199) TRUE 200) FALSE 201) TRUE 202) FALSE 203) FALSE 204) TRUE 205) TRUE
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206) TRUE 207) TRUE 208) FALSE 209) FALSE 210) FALSE 211) TRUE 212) TRUE 213) TRUE 214) TRUE 215) FALSE 216) FALSE 217) TRUE 218) FALSE 219) TRUE 220) FALSE 221) TRUE 222) TRUE 223) TRUE 224) FALSE 225) FALSE 226) TRUE 227) TRUE 228) TRUE 229) TRUE 230) FALSE 231) TRUE 232) TRUE 233) TRUE 234) TRUE 235) FALSE
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236) TRUE 237) FALSE 238) TRUE 239) TRUE 240) FALSE 241) TRUE 242) FALSE 243) FALSE 244) FALSE 245) FALSE 246) FALSE 247) TRUE 248) TRUE 249) FALSE 250) TRUE 251) FALSE 252) FALSE 253) FALSE 254) TRUE 255) FALSE 256) TRUE 257) FALSE 258) TRUE 259) TRUE 260) TRUE 261) TRUE 262) TRUE 263) TRUE 264) TRUE 265) FALSE
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266) TRUE 267) FALSE 268) TRUE 269) FALSE 270) TRUE 271) FALSE 272) TRUE 273) TRUE 274) TRUE 275) FALSE 276) FALSE 277) TRUE 278) TRUE 279) TRUE 280) FALSE 281) TRUE 282) FALSE 283) TRUE 284) FALSE 285) TRUE 286) TRUE 287) FALSE 288) TRUE 289) FALSE 290) FALSE 291) TRUE 292) TRUE 293) FALSE 294) FALSE 295) TRUE
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296) TRUE 297) FALSE 298) TRUE 299) FALSE 300) TRUE 301) FALSE 302) FALSE 303) TRUE
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